Beneficial Ownership

Everything you Need to Know

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 means that the FATF has identified weaknesses in South Africa’s AML/CTF regime that need to be addressed.

The above resulted that on the 29 December 2022, the South African government published the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 including amendments to the Companies Act 71 of 2008 that came into effect on 1 April 2023.

These amendments include the requirement to keep a register of Beneficial Owners updated at CIPC together with its standard compliance requirements.

What is a Beneficial Ownership?

A Beneficial owner in respect of a company, means an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company.

Here’s an example:

Let’s say Paul owns 60% of the shares in Company ABC, giving him a majority vote in company decisions and the power to appoint or remove board members. Additionally, through a chain of ownership involving a holding company, he can influence the management and strategies of Company ABC. Therefore, Paul is considered the ‘beneficial owner’ of Company ABC and his details will be on the Beneficial Ownership Register.

Who Are the Beneficial Owners?

Private Company ((PTY) LTD) - Individuals holding 5% or more of the issued shares. Companies with beneficial owners holding beneficial interest of 5% or more in a subsidiary company.
Close Corporation (CC) - Members holding 5% interest or more of the close corporation.
Non Profit Company with members (NPC) - The members would be the beneficial owners.
Non Profit Company without members (NPC) - The directors would be the beneficial owners.
State-Owned Company (SOC) - Where a shareholder is a minster, the minister would be the beneficial owner.
Trust with beneficiaries - Although this is not required by CIPC as it's submitted to the Master of the High Court.

Why was Beneficial Ownership Regulations implemented in South Africa?

Before these new regulations, companies were not required to disclose their Beneficial Ownership or shareholding information to entities like the CIPC. These issues were treated as confidential matters and were managed internally by the company through its share register, share holder agreements and the like.

However, in response to these fresh regulations set out by the SA Government, the CIPC has made it clear that they have collaborated closely with various regulatory and law enforcement bodies to establish a system for “gathering Beneficial Ownership information with the aim of cross-referencing this information.” These regulatory and law enforcement entities encompass the South African Revenue Service (SARS), the Financial Intelligence Centre (FIC), and the Financial Sector Conduct Authority (FSCA).

The recent obligation has put companies in the spotlight, forcing them to disclose their Beneficial Ownership to the CIPC. Consequently, the era when individuals with hidden interests in a company could go unnoticed is now over. This has various consequences for anyone holding valuable assets or involved in intricate ownership arrangements. The new regulations empowers government bodies such as SARS to go through your ownership structures with a fine tooth comb and take you to task.

When is the Beneficial Ownership filing deadline at CIPC?

The deadline for submitting the first round of Beneficial Ownership register with the CIPC is 1 October 2023 (6 months after the regulation was announced). Companies have little time to finalize their ownership structures and comply with beneficial ownership requirements. Failing which they might find themselves being made an example of.

The CIPC noted that failure to file beneficial ownership information will constitute non-compliance and may result in a court-ordered administrative fine of either 10% of the non-complying company’s turnover or R1 million, whichever amount is greater.

This ads a significant burden on South African Businesses.

Fortunately, our team of specialist can assist to file Beneficial Ownership register with CIPC at minimal cost.

Demystifying the Process: How to Navigate Deregistering Your Company with CIPC

Laetitia Hattingh

Mar 113 min read

Deregistering a company may seem complicated, but it doesn't have to be. If you’re thinking about shutting down your business, knowing how to deregister your company with the Companies and Intellectual Property Commission (CIPC) is crucial. Correctly handling this process will help you avoid fines and stay compliant. This guide will help you understand the steps involved, making the journey much easier.

What Does Deregistration Mean?

Deregistration means removing your company from the official register. This signifies that your business has stopped operating, has no assets, and does not owe any money.

There are two main ways to deregister with CIPC:

Automatic Deregistration: This takes place if your company fails to file annual returns for two consecutive years. If non-compliance continues for five years, your company is deregistered automatically.
Voluntary Deregistration: This process involves a formal request to the CIPC, during which you must settle all your tax and annual return obligations.

Automatic Deregistration: Proceed with Caution

If you don't file annual returns for two or more consecutive years, the CIPC will start automatic deregistration. After five years, your company will officially be deregistered.

However, this route comes with risks:

Ongoing Penalties: While your company is still classified as "active," it can accumulate penalties and late fees from both the CIPC and South African Revenue Service (SARS). For instance, companies can incur penalties up to 10% for non-filing of returns.
Settlement Issues: Any outstanding liabilities must be resolved before you can legally close your company. This means that failing to act could make your situation more complicated.

Given these risks, many find that voluntary deregistration is a better option.

Steps to Voluntarily Deregister Your Company

To ensure a smoother exit, here are the steps you should follow to voluntarily deregister your company with CIPC:

Step 1: Get Compliant with CIPC and SARS

Before you start deregistration, check that your company meets all legal obligations. This includes filing annual returns, ensuring all taxes are paid, and resolving any debts with SARS. A good tip is to review your financial records to confirm compliance. Failure to do so can delay the deregistration process and may lead to additional fees.

Step 2: Collect Supporting Documents

Assemble all the necessary documents for your deregistration request. Essential items typically include:

Your company registration certificate.
Proof that all outstanding taxes have been paid.
Confirmations for filing all annual returns.

Having these documents organized can significantly speed up the process.

Step 3: Draft the Deregistration Letter

You'll need to write a formal letter requesting deregistration.

Step 4: Submit Your Request

After preparing your documents and the letter, send them to CIPC.

Close-up view of a CIPC application form — A detailed view of a deregistration application form ready for submission.

Key Points to Remember

Confirmation of Submission: Always check back to confirm the CIPC has received and is processing your request.
Potential Fees: Be aware that there may be fees associated with the deregistration process. These can vary widely depending on the specifics of your company.
Final Notification: Expect a notification from CIPC once the deregistration is complete. Keep this document secure, as it may be essential in the future.
Clearing Liabilities: Make sure your company has settled all financial obligations before deregistering. Any debts must be addressed to close your business properly.
Consult a Professional: It can be beneficial to consult with a legal or financial advisor. Their expertise can help you navigate the details and ensure compliance.

Final Thoughts

Deregistering a company can feel like a daunting procedure with many challenges. However, by understanding your options—voluntary versus automatic deregistration—you can approach this process confidently.

By following the outlined steps, collecting your documents, ensuring compliance with CIPC and SARS, and remaining informed, you can handle your business closure smoothly. Also, consider seeking advice from professionals to streamline the process and reduce stress.

As you take these steps, think about your future plans and how your experiences will shape your next moves. Although closing a chapter may feel heavy, it also creates space for new opportunities.

Eye-level view of a serene landscape signifying new beginnings — An eye-level view of a tranquil landscape symbolizing new opportunities ahead.

RKH Accounting CC, can assist you through the process of deregistration. Contact us today for our expert advise on deregistering your company legally.

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