South Africa’s new Beneficial Ownership requirements for companies

South Africa’s Companies & Intellectual Property Commission (CIPC) announced the promulgation of the Companies Amendment Regulations 2023 on 25 May, which provide for the implementation of amendments to the Companies Act 71 of 2008 including new beneficial ownership (BO) information requirements.

In February, the Financial Action Task Force (FATF) placed South Africa on its ‘grey list’, classifying the country as a jurisdiction that is subject to monitoring and is actively working with the FATF to address strategic deficiencies in its anti-money laundering (AML) and counter-terrorism financing (CTF) regimes within agreed timeframes.

One of the eight areas of deficiencies identified by the FATF was the challenge faced by law enforcement authorities in accessing accurate and updated BO information of natural persons who ultimately own or exercise effective control over companies.

Following the amendments to the Companies Act, all the BO information now required in respect of sections 33, 50 and 56 is to be filed with the CIPC as follows:

• Section 33 of the Companies Act requires that all companies, when filing annual returns, must include a copy of their section 50 Securities Register.
•  Section 50 requires companies that are not ‘affected companies’ to record and update BO information within their Securities Register.
•  Section 56 further requires ‘affected companies’ to establish and maintain a register of the persons who hold beneficial interests equal to, or more than, 5% of the total number of securities of a particular class of securities (Beneficial Interest Register). This is in addition to maintaining the existing Security Register.

An ‘affected company’ is a regulated company under section 117 (1) (i) of the Companies Act and a private company that is controlled by or is a subsidiary of a regulated company.

A ‘beneficial owner’ is defined as a natural person who, directly or indirectly, owns 5% or more of a company, or who exercises effective control over the company. A company or a trust cannot be regarded as a beneficial owner.

While the BO information will not be made available to the public, law enforcement and competent authorities will have access to the information.

All entities are required to submit their BO information without delay. Any changes to a company’s BO register need to be filed with CIPC within five days of the changes coming into effect. If there are no changes, an annual update is required to confirm that the BO information has not changed. This is to be submitted with the annual return. Failure to provide the required information may result in an administrative fine that must not exceed 10% of a companies’ turnover during the non-compliance period or ZAR1 million, whichever is higher.

The person who files BO information with the CIPC must have a valid, written mandate from the company authorising them to do so. The filing should also include the mandate of the filer, the companies’ Security Register, certified copies of the BOs’ identification documents and passports, and
any other supporting documentation requested by the CIPC.

“Companies operating in South Africa should ensure that their BO information has been filed with the CIPC as soon as possible and that the required information reflects for all persons with more than 5% beneficial ownership of a company or close corporation” said Ralph Wichtmann, Managing Director of Sovereign Trust (South Africa).