Beneficial Ownership

The Companies and Intellectual Property Commission (CIPC) has implemented a new measure in their ongoing efforts to mitigate the risks that led to South Africa’s greylisting.

The basics of beneficial ownership

The CIPC has implemented a beneficial ownership register, which is essentially a database of
natural persons who own or control legal entities that are registered with the CIPC. The ultimate goal of this new development to help law enforcement by ensuring easy access to information about who the owners or controllers of any given business are during an investigation. Over and above this, it is a move designed to safeguard against the risks identified in South Africa’s national risk assessment. It provides an extra layer of difficulty for individuals looking to get involved in terrorist financing, money laundering, corruption or tax evasion.

Background to beneficial ownership

The origins of the requirement to provide information about beneficial ownership can be found in the Mutual Evaluation Report of South Africa, which was released by the Financial Action Task Force (FATF) in 2021. This report set out to summarise how effective South Africa’s anti-money laundering and counter-terrorism financial measures were. One of the areas that the report revealed to be lacking was authorities’ access to accurate and up-to-date information about business ownership.
As a result, the General Laws (Anti-Money Laundering and Combating Terrorism Financing)
Amendment Qct 22 of 2022 (GLAA) was enacted. The new legislation obliges companies to keep an up-to-date register of every person who holds “beneficial interest equal to or in excess of 5%” of the company’s total securities.

Who must be identified as a beneficial owner?

Anyone who directly or indirectly owns or exercises control of a company needs to have their
details added to the beneficial ownership register. Every company registered with the CIPC is
required to file beneficial ownership information, apart from certain listed companies and nonprofit organisations that have no members. The definition of “beneficial owner” includes anyone who exercises effective control of a company through holding beneficial interests in the securities. It also includes anyone who exercises or has control of the exercise of voting rights. Likewise, anyone who has the right (or control of the right) to appoint and remove directors has to be added to the beneficial ownership register.

Documents required to file beneficial ownership information

There is a list of documents you’ll need before you file beneficial ownership information. This list includes:
• A written mandate authorising the BO filer. This can be a directors’ letter, a shareholders’
letter, a resolution or a power of attorney.
• A certified copy of the ID document/passport of all BOs. These must have been certified
within the last three months.
• Depending on what type of business you have, you may be required to file a copy of your
securities register every year. Companies may also need to have a register of beneficial
interest in securities (in issue).
• A beneficial ownership disclosure form must be indicated.