What is Beneficial Ownership & Why is it Important?

What is Beneficial Ownership and why is it important?

Beneficial Ownership transparency is essential in preventing and detecting financial crimes. Anonymity enables many illegal activities to take place hidden from law enforcement authorities, such as tax evasion, fraud, corruption, money laundering, financing terrorism, to mention a few.

By addressing the deficiencies outlined by the FATF (Financial Action Task Force) and its 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. This means that all CIPC registered entities affected by the amendment, will be obligated to declare and register all beneficial owners.

 

What is Beneficial Ownership

A Beneficial Owner in respect of a company, is an individual(s) who, directly or indirectly, ultimately owns that company, or exercises effective control of that company, which they do through:

• Ownership of securities (shares)
• The exercise of or control of the exercise of the voting rights associated with securities of that company;
• The exercise of or control of the exercise of the right to appoint or remove members of the board of directors of that company;
• The holding of beneficial interests in the securities, or the ability to exercise control, including through a chain of ownership or control, of a holding company of that company;
• The ability to exercise control, including through a chain of ownership or control, of

• a juristic person other than a holding company of that company;
• a body of persons corporate or unincorporate;
• a person acting on behalf of a partnership;
• a person acting in pursuance of the provisions of a trust agreement; or
• The ability to otherwise materially influence the management of that company.

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 when filing the CIPC annual return.

Who is Beneficial Owner?

An individual/ natural person who, directly or indirectly, ultimately owns 5% and more of a company or exercises effective control of a company.  A trust or a company cannot be a beneficial owner.
Beneficial ownership below 5% does not need to be declared.

 

What is an Affected Company?

It is a regulated company as set out in section 117(1)(i) and a private company that is controlled by or a subsidiary of a regulated company as a result of any circumstances contemplated in section 2(2)(a) or 3(1)(a). An affected company includes:

• A public company;
• A state-owned company (unless exempt)
• A private company – in terms of the transfer of securities when exceeding the percentage prescribed by Minister (10%) within a 24-month period;
• A private company that is controlled by an affected company (regulated company) or is a subsidiary of an affected company.

Note: The Beneficial ownership registry will only be made available to verified law enforcement agencies (LEAs), regulatory bodies and CIPC accredited authorities.

Mandatory documents required to file beneficial ownership information include:

• Written mandate authorising the filer to file the beneficial ownership. A directors’/shareholders’ resolution/letter or power of attorney will be accepted.
• Certified ID/Passport copies of all beneficial owners (not older than 3 months).
• Certified ID copy of the filer
• Securities register
• Beneficial Interest Register (if applicable)
• Any other supporting documents as requested by CIPC.

Note: In the case of close corporations and non-profit companies, a member’s register will nee to be filed. Non-profit companies with no members, must still declare beneficial owners i.e. those with effective control.

 

Please feel free to contact us on (011) 794-5582 should you need assistance or would like to find out more.