Understanding the Registration of Beneficial Ownership in South Africa

The registration of beneficial ownership is an important legal development in South Africa, aimed at enhancing transparency in corporate structures and combating financial crimes such as money laundering and tax evasion. This initiative aligns with global standards set by the Financial Action Task Force (FATF) and reflects South Africa’s commitment to improving corporate governance and accountability.

Legal Framework

The primary legislation governing the registration of beneficial ownership in South Africa includes the Companies Act of 2008, the Financial Intelligence Centre Act (FICA) of 2001 and the Trust Property Control Act of 1988. Amendments to these laws have introduced specific requirements for companies to disclose their beneficial owners.

1. Companies Act: The Companies Act mandates that companies must maintain a register of their beneficial owners. A beneficial owner is defined as an individual who ultimately owns or controls a significant percentage of the company, usually at least 25% of the shares or voting rights.
2. Financial Intelligence Centre Act (FICA): FICA imposes obligations on reportable and accountable institutions, including companies, to identify and verify the identity of beneficial owners as part of their customer due diligence processes. This is critical in the fight against money laundering and terrorism financing.
3. Trust Property Control Act of 1988

The Trust Property Control Act regulates the management of trust property such as movable and immovable property, financial assets etc. And until the amendments to various laws after the recommendations from the Financial Action Task Force (FATF), there was little other act that regulated the control of trust property, however that has changed with the recent amendments and are trust also now under a legal obligation to submit its ultimate beneficial ownership at the Master’s Office.

How to Register Beneficial Ownership

The process of registering beneficial ownership involves several key steps:

1. Identify Beneficial Owners: Legal entitities must conduct due diligence to identify individuals who ultimately own or control at least 5% of the company’s shares or voting rights, or with trusts, all the trustees and all the beneficiaries This includes reviewing ownership structures and assessing direct and indirect ownership interests.
2. Collect Required Information: Once beneficial owners are identified, legal entities must collect and maintain specific information, including:
   • Full names
   • Identification numbers or passport details
   • Residential addresses
   • The nature and extent of their interest in the company or trusts (e.g., percentage of shares owned, or type of beneficiary)
3. Maintain a Beneficial Ownership Register: Legal entities must create and maintain a register that contains all the information collected about their beneficial owners. This register should be kept updated and made available for inspection by relevant authorities.
4. File with the (CIPC) and Masters office: Companies must submit their beneficial ownership register to the CIPC, and trusts with the Masters Office as part of their annual return filings. This ensures that the information is stored in a central repository accessible to regulatory bodies.
5. Implement Internal Controls: Legal entities should establish internal controls and processes to ensure ongoing compliance with beneficial ownership registration requirements. This includes regular reviews and updates to the register as ownership changes occur.
6. Training and Awareness: Employees responsible for compliance should receive training on the legal obligations surrounding beneficial ownership registration and how to conduct due diligence effectively.

Implications for legal entities

The requirement to register beneficial ownership has several implications for legal entities operating in South Africa:

• Increased Transparency: Organizations must improve their internal processes to ensure accurate and up-to-date records of their beneficial owners, fostering greater transparency in corporate structures.
• Enhanced Due Diligence: Companies will need to implement robust due diligence measures to verify the identity of beneficial owners, which may involve engaging legal and compliance experts.
• Risk Management: By understanding the ownership structures within their organizations, companies can better manage risks associated with financial crime and reputational harm.

Conclusion

The registration of beneficial ownership in South Africa is a significant step towards improving corporate governance and enhancing transparency in business practices. By requiring legal entities to disclose their beneficial owners, the legislation aims to deter financial crimes and promote accountability within the corporate sector.

Organizations must prioritize compliance with these requirements, not only to avoid legal repercussions but also to contribute to the broader goal of building a trustworthy and transparent business environment. For comprehensive guidance, companies should consult legal and compliance professionals familiar with the relevant legislation and best practices in beneficial ownership registration.