Beneficial ownership is a crucial aspect of corporate governance that helps promote transparency and combat financial crimes such as money laundering and terrorist financing. To rectify the shortcomings identified by the FATF, leading to the inclusion of South Africa in its Grey List, and to address the FATF’s Recommendation 24, the CIPC has been directed by the General Laws Amendment Act, the Companies Act, and its associated Regulations to create a registry of Beneficial Owners (BOs) for all entity categories governed by the Companies Act and the amended Close Corporations Act. Consequently, all companies registered with the CIPC are now obliged, as advised by the CIPC, to disclose and register their Beneficial Owners (BOs).
In accordance with the regulations set forth by the Companies Act, anyone who holds more than 5% beneficial ownership in a company or close corporation is required to submit the necessary information to the Companies and Intellectual Property Commission (CIPC). The definition of a beneficial owner includes individuals who directly or indirectly own a company, exercise control over it, or have material influence through various means such as holding beneficial interests in securities, exercising voting rights, or appointing directors.
To ensure compliance, the following transitional arrangements have been established for the filing of Beneficial Ownership for existing companies: For entities that were incorporated prior to 24 May 2023, the Securities Register or Beneficial Interest Register (depending on the entity’s classification as an Affected or Not an Affected entity) must be filed as part of the Annual Returns filing process. This requirement comes into effect from 24 May 2023, which coincides with the publication date of the final Amended Companies Regulations.
To facilitate compliance with the new requirements, the CIPC has provided user-guidelines for filing beneficial ownership details through an online automated process. You can click here to open that guide: Beneficial Ownership User Guidelines
Non-compliance with the beneficial ownership requirements will be investigated and enforced by the CIPC, which has the authority to impose financial fines and sanctions on directors and relevant individuals. Access to the Beneficial Ownership Registry is currently limited to verified law enforcement agencies, regulatory bodies, and CIPC accredited authorities.
While the implementation of the registry presents certain challenges, such as the complexity of company structures, it represents a significant step in combating financial crimes and improving South Africa’s standing with respect to international anti-money laundering and counter-terrorism financing efforts.
In conclusion, the introduction of the Beneficial Ownership Registry and the amended beneficial ownership requirements under the Companies Act are aimed at increasing transparency and accountability in the corporate sector. By identifying the individuals who own or control companies, these measures contribute to the fight against financial crimes. Ultimately, the successful implementation of the registry and adherence to beneficial ownership obligations will strengthen South Africa’s position in combating illicit financial activities.