In keeping with addressing deficiencies outlined by the FATF and its consequential grey listing of South Africa, the CIPC has been mandated in terms of the General Laws Amendment Act, the Companies Act and its Regulations to establish a register of Beneficial Owners (BOs) for all entity types registered in terms of the Companies Act and the Close Corporations Acts as amended. There is therefore an obligation for all CIPC registered companies affected by the amendment as per the CIPC’s advice, to declare and register all BOs.
Beneficial ownership for a company is defined as:
An individual(s) who directly, or indirectly ultimately owns that company, or exercises effective control of that company (Section 55 of the General Laws Amendment Act, read with the amendments to the Companies Act and Companies Act Regulations), including 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.
There is a minimum 5% threshold for beneficial ownership declaration, with an aggregate of 100%, implying that any beneficial ownership below 5% need not be declared.
The CIPC has released user-guidelines, which outlines the necessary steps of filing beneficial ownership details via the online automated process.
The submission of beneficial ownership information must be done as and when the information changes or at least once annually on the CIPC e-services platform. Anyone can file this information on behalf of a juristic entity provided there is a written mandate that authorises the filer and the written mandate must be filed as part of the compulsory supporting documents.
Mandatory documents required to file beneficial ownership information include:
- Written mandate authorising BO filer and this can be in the form of a directors’/shareholders’ resolution/letter or power of attorney. Any person can file BO information provided the mandate is in place.
- Certified ID/Passport copies of all BOs. Uncertified identification copies; incorrectly certified; or certification older than 3 months will invalidate the beneficial ownership filing.
- Every company except affected companies must annually file a copy of their securities register containing all the information relating to shareholders of a company (legal owners). As per the CIPC, an affected company is a public company, a state owned company or a private company regarded as a regulated company.
- Affected companies must establish and maintain a register of beneficial interest in securities (in issue). The extent of the beneficial interest must be established and the updated register filed with the CIPC.
- A beneficial ownership disclosure form – complex ownership structures, inclusive of juristic persons, trusts, etc. must be indicated in this form.
Non-compliance will be investigated and compliance enforced by the CIPC, who have also been mandated by the General Laws Amendment Act, to impose financial fines and sanctions against directors and relevant persons for non-adherence, amongst other actions.
The BO registry/repository will be made available upon vetting of requests, to verified law enforcement agencies (LEAs), regulatory bodies and CIPC accredited authorities.
Evidently this is a massive step towards getting South Africa off the FATF grey list as well as proactively identifying and connecting juristic entities, associated financial assets and illicit flows to the respective beneficial individuals. The centralised registry and the intended triangulation of its information between the CIPC, FIC and LEAs promises notable successes in the fight against money laundering, terrorist and proliferation financing. The CIPC set BO declaration at a low 5% because the Companies Act currently provides for 5% of beneficial interest in securities, however this may prove onerous for accountable institutions more especially in instances where complex company structures are involved. Hopefully this noble, yet somewhat difficult obligation will yield great results, justifying the efforts. It is pertinent to note that the FIC has officially published that institutions consider those holding 5% or more of ownership interest as having a controlling stake in the business.
*Please note: as mentioned above the centralised registry for the time being, will only be available to verified law enforcement agencies (LEAs), regulatory bodies and CIPC accredited authorities. This means that for now no 3rd party software providers will be able to integrate into this registry. DocFox will continue to keep you updated regarding any changes to this registry and its accessibility.
For further guidelines and steps on BO e-filing and related information please view the CIPC Beneficial Owner filing requirements.
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