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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.

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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.

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

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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.

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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.

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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.

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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.

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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).

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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.

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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.

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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.

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This ads a significant burden on South African Businesses.

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

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Unraveling the Mystery: Navigating the Mandate of Shareholder and Corporate Disclosure of Beneficial Ownership

In the intricate landscape of business ownership structures, the concept of beneficial ownership stands as a crucial element that sheds light on the ultimate individuals who benefit from the assets held in various corporate entities. Shareholders and companies bear an obligation to disclose these beneficial owners, unraveling a complex web of ownership for transparency and accountability.


Understanding Beneficial Ownership


Beneficial ownership refers to the real individuals who enjoy the benefits of ownership, even if the shares are held in someone else's name. This arrangement often occurs in privately held companies or through complex corporate structures. Identifying beneficial owners is paramount as it exposes the true power dynamics within an organization and holds accountable those who ultimately reap the rewards.


Beneficial Ownership Structure

The Disclosure Dilemma


Given the significance of beneficial ownership, shareholders and companies are mandated to disclose this information. Such transparency enhances corporate governance, mitigates risks related to money laundering and corruption, and fosters trust among stakeholders. The disclosure mandate ensures that the true controllers behind corporate entities are known, preventing illicit activities and promoting integrity in the business ecosystem.


Legal Landscape and Compliance


Various jurisdictions have enacted laws and regulations requiring the disclosure of beneficial ownership. Compliance with these legal provisions is essential to avoid penalties and maintain credibility in the business realm. Shareholders and companies must navigate the intricate legal landscape to ensure that accurate and up-to-date information regarding beneficial ownership is disclosed in accordance with the law.


Balancing Privacy and Accountability


While transparency is essential, the delicate balance between privacy rights and accountability must be maintained. Protecting sensitive information about beneficial owners is crucial, but not at the expense of evading responsibilities or engaging in fraudulent activities. Striking a balance between privacy and accountability is key to fostering a business environment built on trust and ethical conduct.


Conclusion


In the dynamic world of corporate ownership, understanding the obligation to disclose beneficial ownership is paramount. Shareholders and companies play a pivotal role in unraveling the mystery of ownership structures, paving the way for enhanced transparency, accountability, and integrity. By navigating the mandate of disclosing beneficial ownership with diligence and compliance, businesses can uphold ethical standards, mitigate risks, and foster trust in the global business landscape.

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