The Companies and Intellectual Property Commission (CIPC) has reminded entities that have not filed their beneficial ownership information to do so, adding it will be engaging with some of the entities “to enforce” the filing of this information.
The CIPC will also conduct inspections to verify whether the filed beneficial ownership information on its records corresponds with records kept by the respective entities, Rory Volker, the Commissioner of the CIPC, said in a notice published on 19 September.
Companies’ beneficial ownership and beneficial interest reporting obligations arise from:
- the amendments to the Companies Act following the promulgation of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Act, which came into effect on 31 December 2022 and 1 April 2023; and
- the amendments to the Companies Regulations, which came into effect on 24 May 2023.
In terms of the amended regulations, entities incorporated after the promulgation of the amended Companies Regulations must file their beneficial ownership information within 10 business days after the date of incorporation. This also applies to the updating of beneficial ownership records when there are changes.
Pre-existing entities which had their anniversary date after the promulgation of the amended Companies Regulations must also file their beneficial ownership information.
Concept of a ‘beneficial owner’
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act introduced a concept of “beneficial ownership” into the Trust Property Control Act and the Companies Act and amended the definition of “beneficial owner” in the Financial Intelligence Centre Act.
The amendments to section 55 of the Companies Act have introduced a comprehensive definition of a “beneficial owner”, encompassing ownership, control, and material influence over a company.
A beneficial owner is defined an individual (natural person) who “directly or indirectly, ultimately owns the company or exercises effective control of the company”.
In terms of the definition, a natural person may be seen to exercise effective control of the company if he, she, or they:
- hold a beneficial interest (that is, 5%) in the securities of a company;
- have control over voting rights, or control over the exercise of voting rights associated with the securities of a company;
- can exercise a right to appoint or remove members of the board of directors of a company, or have control over the exercising of a right to appoint or remove board members; and/or
- can otherwise materially influence the company (directly or indirectly).
The above list is not exhaustive. If it can be demonstrated that an individual has effective control over a company by reading the legislation purposefully, the details of such individual must be included in the company’s securities register.
Which companies must file beneficial interest registers?
In terms of the amendments (to sections 33(1) and 50 of the Companies Act), all companies are required, when filing their annual return with the CIPC, to file their securities register in addition to their annual financial statements (where applicable).
A company may also have to file, with its annual return, a separate register containing the details of those persons, both natural and juristic, who hold a beneficial interest in the company equal to or more than 5% of the total number of issued securities of any class of securities issued by the company, together with the extent of those beneficial interests.
Companies that are required to file a beneficial interest register are called affected companies.
An affected company includes all regulated companies (public companies, state-owned enterprises, and private companies that meet the requirements set out in section 118(1)(iii) of the Companies Act) and any company that is controlled by or the subsidiary of a regulated company. The requirements in relation to a private company are:
- where the company voluntarily becomes a regulated company in the company’s memorandum of incorporation; or
- where the company has transferred more than 10% of its issued share capital (other than between or among related or inter-related parties) within the preceding 24 months.
On 29 May 2023, the CIPC issued a guidance note that provides a specific dispensation to companies listed on a local stock exchange. A listed entity that is already required to submit the information contained in the beneficial ownership information register and securities register to a competent authority in terms of the rules of the exchange is not required to submit its beneficial ownership information on the CIPC portal. This exemption also applies to the listed entity’s related entities.
What information must be filed?
Affected companies must complete the beneficial ownership register on its profile on the CIPC Portal. A step-by-step user guide can be accessed here: Beneficial Ownership Guidelines.
The following information or documentation must be filed with the register:
- mandate of the person filing the register;
- certified copies of the identity documents of the beneficial owners;
- certified copies of the passports of the beneficial owners;
- disclosure form reflecting the hierarchy of entities and other legal forms; and
- supporting documents that the CIPC may request.
Companies incorporated before 24 May 2023 had to complete their securities register or beneficial interest register as part of their annual returns filing process from 24 May 2023. Companies incorporated on and after 24 May 2023 must complete such register of their beneficial owner within 10 days of incorporation.
Additionally, changes to the beneficial ownership of the affected or non-affected company needs to be filed with the CIPC within 10 days of the changes taking place.
Failure to comply with the provisions relating to the register or beneficial interest requirements is an offence in terms of the Companies Act. A compliance notice may be issued in the case of non-compliance, and an administrative penalty of 10% of the non-complying company’s turnover or R1 million, whichever is greater, may be imposed.
