By Atlegang Maredi
Beneficial ownership emphasises on accountability and openness within companies, it has emerged as the key component of corporate governance. The Companies Act, as well as the Regulations thereto, were subject to amendments following the enactment of the General Laws (Anti-Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (“General Laws Amendment Act”). These latest amendments were effective from 1 April 2023. The amendments are aimed at regulating transparency in relation to the beneficial ownership of companies and other legal arrangements. These amendments align South Africa with the Finance Action Task Force (FATF), a global organisation tasked with combating money laundering, tax evasion and terrorism financing.
Additionally, and in line, said amendments, the Companies and Intellectual Property Commission (CIPC) launched the Beneficial Ownership register, which requires, companies in South Africa to reveal ultimate owners in accordance with specific rules.
Who is the Beneficial Owner
The Beneficial Ownership is for a natural person who directly or indirectly owns or has control over a company regardless of the person’s status as a registered shareholder. Through complete disclosure of those with substantial control over legal entities operating in South Africa.
For a person to be required to register as a beneficial ownership with CIPC, he or she must:
- Have at least 5 % of a company’s share,
- Have considerable control on business decisions or voting rights,
- Possess the power to designate or dismiss directors and,
- Have the advantage of agreement or trust with authority over the company.
What must be disclosed
In order to submit the beneficial ownership data, the company must supply a written register with a record of every person who is a beneficial owner. This information should include such beneficial owner’s:
- Full name,
- Date of Birth,
- Email Address,
- Phone Number,
- Physical or Postal Address,
- Identity number in South African or Passport number if a foreigner,
- Confirmation of the scope of participation, and extent of ownership or effective control, in the company,
- Must be accompanied with a certified copy of the file holder’s identity document (South African Citizens must have an identity document, which may be verified by the Department of Home Affairs, and foreign nationals must have certified copies of their passport).
The introduction of the Beneficial Ownership rules ensures transparency and identification of persons with significant control. This reduces the exploitation of companies for illegal purposes, and responsibility helps law enforcement investigate financial crimes.
Consequences of non-compliance
Regulations pertaining to beneficial ownership are essential for promoting honesty and trust in the business world.
Failure to comply, with the requirement to disclose beneficial ownership as set out above, will result in the following consequences as set out on the CIPC Customer Notice 4 that was issued on 10 January 2025:
- Not being able to perform transactions with the companies,
- Being issued with a compliance notice and/or court sanctioned administrative fine and ultimately being referred to deregistration
- Failure to comply with the compliance notice results in the imposition of an administrative fine.
We thus urge companies and legal entities registered in South Africa who have yet to comply with this requirement to disclose beneficial owners of the company to do urgently to avoid various consequences of non-compliance as mentioned above.
Sekgala and Njau Attorneys has a team of company/ commercial lawyers who will provide you with the necessary guidance that will ensure a smooth registration of your company’s beneficial owners with CIPC. Contact us today!
South African Citizens must have a passport or identity document, which may be verified on the Department of Home Affairs system, and foreign nationals must have certified copies of their passport in order to register their beneficial ownership. In order to submit the beneficial ownership data, the company must supply a written directive file that includes the file name, identity number and a certified copy of the file holder’s identity document. Each beneficial owner’s ownership stake and voting rights are listed by the register of beneficial interest.
Beneficial ownership rules ensure transparency and identification of persons with significant control. Corporate social responsibility reduces the exploitation of companies for illegal purposes, and responsibility helps law enforcement investigate financial crimes.
Regulations pertaining to beneficial ownership are essential for promoting honesty and trust in the business world. Companies are advised to put compliance first in order to stay out of trouble and make sure that the changing legal requirements are followed.