These amendments impose additional obligations on companies and trusts to submit specified details on beneficial ownership to ensure law enforcement has timely access to accurate, up-to-date and verified information on who the ultimate owners (also referred to as the “warm bodies”) of the company or trust are, in order to mitigate the risks identified by the FATF where companies and trusts were identified as susceptible vehicles for exploitation in money laundering and terrorism financing activities.
COMPANIES:
The CIPC has implemented a Beneficial Ownership Register which will compel any individual who directly or indirectly owns 5% or more of a company, or exercises effective control over it, to register their beneficial ownership through the CIPC. This register will not be available to the public but will be shared with enforcement agencies as part of the efforts to combat money laundering and terrorism financing in South Africa.
Companies will be required to mandate an individual of their choosing, in writing, to file beneficial information on the company’s behalf to the CIPC. The mandated individual will be required to file:
- the original mandate by the filer;
- the company’s Securities Register;
- certified ID/passport copies (as applicable) of all recognised beneficial owners; and
- a Disclosure form reflecting the hierarchy of entities and other legal forms (including all owners having less than 5% ultimate ownership or control over the company); and
- any other supporting documentation that the CIPC may demand.
Once the CIPC has received all the necessary information and documentation from the relevant company, it will issue the company with a reference number to track the filing and, provided that the filing is done correctly, issue a confirmation certificate confirming the company has satisfactorily filed its beneficial ownership with the CIPC.
To keep the Register accurate, companies are required to make annual filings confirming the validity of the information that they have filed and any change to the beneficial ownership of a company must be filed with the CIPC within 10 days of any such change.
Guidance Notice 2 of 2023 allows companies a grace period until the 30th of September 2023 to file their Beneficial Ownership Register, whereafter annual filing of a company’s beneficial ownership must be done in accordance with a company’s Annual Return anniversary date. Failure to file beneficial ownership information with the CIPC will constitute non-compliance with the Companies Act 71 of 2008, as amended, 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.
A further requirement is that all companies incorporated after 24 May 2023 must file their beneficial ownership information with the CIPC, within 10 days of their incorporation.
The CIPC has confirmed that as at 6 June 2023, 440 entities have attended to the filing of their Beneficial Ownership Register.
TRUSTS:
The Amendment Act also amends the Trust Act, by requiring trustees (or a person who has been mandated, in writing, to act on behalf of the trustees) to register a record of the founder, all trustees and all named beneficiaries of the trust and report this information to the Master of the High Court where the trust is registered. The trustees (or mandated individual) are further required to store a record of this information together with copies of all recognised beneficial owners’ ID/passport documents (as applicable). Access to this information is restricted to various government bodies.
In essence, the individuals who ultimately control the trust and are positioned to benefit from its assets and income will be recognised as the beneficial owners.
The objective of the Amendment Act concerning trusts is to establish a degree of transparency with regards to the ownership of trust assets prior to the transfer of such assets or their income to the beneficiaries.
The Master must keep an electronic register of the beneficial owners of all trusts. The Beneficial Ownership Register form and register can be accessed online and requires trustees to provide detailed information on the beneficial owners of trust assets. Where the beneficial owner is a minor, the same information must be provided for the legal guardian of the minor.
This regulation requests all trusts to immediately comply and file the relevant beneficial ownership information with the Master’s Office.
Trustees who do not comply with the above requirements may face a penalty of up to R10 million or imprisonment for a term of 5 years. Further, the Amendment Act grants the Masters’ offices the added authority to dismiss trustees who are deemed to have performed inadequately, declined a lawful request, have been found guilty of dishonesty, been sequestrated, declared mentally incapable, or failed to provide adequate security.
Although we have now established legislation and processes to tackle money laundering, terrorist financing, and proliferation financing, in accordance with FATF recommendations, we have yet to fully exploit its potential and achieve measurable outcomes. To aid in removing South Africa from its grey listed status, it is essential to prioritise the aforementioned amendments and establish effective compliance frameworks within your organisation.
For more information, please get in touch with your local Moore Firm.