Beneficial Ownership refers to the ownership structures of legal entities such as companies or trusts. When establishing beneficial ownership, one is establishing exactly which individual benefits from the privileges associated with ownership of a legal entity.
Sometimes, the actual owner of a company is not the same individual under whose name the company is registered. For example, a company is registered reflecting the names of the directors of the company (who makes decisions in the day-to-day operations of the company and benefits from it through their director's fees at the end of the month), but the actual owner of the company (the shareholder) who also benefits from the proceeds of the company and who also has a say in the operations of the company is someone totally different. However, as only the appointed directors' details and benefits are on record and are taxed accordingly, the shareholder and ultimate owner of the company's details and benefits are not reflected anywhere which means the shareholder is not paying taxes and thus cannot be prosecuted for tax evasion. This illegal method of structuring was most often implemented for money laundering, tax evasion and terrorism financing activities.
In March 2023, South Africa was placed on the Financial Action Task Force (FATF)'s "grey list" of countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CTF) regimes. This meant that the FATF had identified weaknesses in South Africa's AML/CTF regime that needed to be addressed. This resulted in the South African government publishing the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (including amendments to the Companies Act 71 of 2008) on 29 December 2022 which came into effect on 1 April 2023.
These amendments included the obligation of businesses in South Africa to officially register their beneficial owner structures with the Companies and Intellectual Property Commission (CIPC), making it harder for criminals to conduct illicit transactions and launder money, at the same time promoting transparency by clearly establishing accountability. The requirement is for businesses to keep an updated Register of Beneficial Owners with CIPC and to file this information, together with its standard compliance requirements, with the CIPC on a regular basis.
The CIPC implemented the Beneficial Ownership Register on 1 April 2023 with voluntarily declaration. On 24 May 2023, the filing of beneficial ownership and securities registers became mandatory. As from 1 April 2024, the CIPC introduced a hard-stop functionality preventing businesses that have not complied with beneficial ownership filing requirements from completing the process of filing their annual returns. Continued non-compliance of filing beneficial ownership could result in companies being deregistered or court-ordered administrative fines to be issued.
Please feel free to contact us should you need assistance to file your business' Beneficial Ownership or if you require any further information on this matter.
FAQ:
Any regulated company including
the following:
î All Public companies, including
public companies listed on a stock exchange.
î State owned companies.
î Any private company regulated by
the Takeover Regulations and which experienced a transfer of more than 10% of
its securities as a result of an amalgamation or merger during the previous 24
months.
î Any subsidiary of an affected
company.
An individual(s)
who directly, or indirectly ultimately owns that company, or exercises
effective control of that company through:
(i) The holding of beneficial interests in the securities.
(ii) The exercise of or control of the exercise of voting rights.
(iii) The right or control of the right to appoint and remove
directors.
î In the case of a
PTY
The
beneficial owners are the shareholders if they are:
Individuals
holding 5% or more of the issued shares
Companies
with beneficial owners holding a beneficial interest of 5% or more in the
original company (including foreign companies)
î In the case of a
Trust
Trusts
beneficiaries
î In the case of a
CC or PLC
Members
holding 5% interest or more in the company.
î In the case of an
NPC with members
The
members would be the beneficial owners.
î In the case of an
NPC without members
The
directors would be the beneficial owners.
î In the case of an
SOC where a shareholder is a minister
The
minister would be the beneficial owner.
î The right or entitlement of a person, through ownership, agreement, relationship or otherwise, alone or together with another person to -
î Receive or
participate in any distribution in respect of the company’s securities;
î Exercise or cause
to be exercised, in the ordinary course, any or all of the rights attaching to
the company’s securities; or
î Dispose or direct
the disposition of the company’s securities, or any part of a distribution in
respect of the securities.