Understanding South Africa's New Beneficial Ownership Register: What You Need to Know

In a significant move to combat financial crime and strengthen anti-money laundering measures, the Companies and Intellectual Property Commission (CIPC) of South Africa has introduced a new platform called the 'Beneficial Ownership Register.' This groundbreaking development requires all companies to disclose their beneficial ownership information to the CIPC by October 2023. This blog post aims to shed light on the implications of this regulation and the actions businesses need to take to ensure compliance.

The Urgency of Beneficial Ownership Registration:

As concerns raised by the Financial Action Task Force (FATF) regarding South Africa's financial crime vulnerabilities gained traction, the CIPC responded by implementing stricter measures. Micaela Paschini, an attorney at Tax Consulting SA, emphasized the urgency of complying with the beneficial ownership registration requirements. Failure to update and maintain this information not only labels a company as non-compliant but also poses risks to various aspects of its operations, including banking relationships.

Understanding Beneficial Ownership:

Paschini clarifies that "beneficial ownership" refers to individuals who either directly or indirectly own a company or exercise effective control over it. This encompasses various scenarios such as having a beneficial interest in shares, controlling voting rights, influencing director appointments or removals, exerting control through a chain of ownership or control, or materially impacting the management of the company.

Complying with Beneficial Ownership Regulations:

To ensure compliance with the new regulations, companies and close corporations must establish and maintain a Beneficial Ownership Register. This requirement extends to profit companies, non-profit companies, external companies, non-exempt state-owned companies, and close corporations. While listed companies may have slightly different requirements, the concept of beneficial ownership remains the same.

Companies and individuals with more than 5% beneficial ownership in a company must submit their information to the CIPC. Furthermore, any changes in beneficial ownership must be promptly updated within five days of the change. The CIPC has integrated the functionality for declaring beneficial ownership into its e-services landing page for easy access.

Consequences of Non-Compliance:

Tax Consulting SA warns that failing to establish and maintain a Beneficial Ownership Register can have dire consequences for both companies and their directors. Non-compliance may lead to investigations, compliance notices, severe penalties, fines, and even disqualification of directors. To avoid such potential risks, the responsibility falls on shareholders, directors, and owners of companies to ensure compliance with the CIPC's new requirements.

Conclusion:

South Africa's new Beneficial Ownership Register is a significant step toward strengthening the country's financial crime prevention framework. By obligating companies to disclose their beneficial ownership information, the CIPC aims to enhance transparency and combat money laundering. To safeguard their businesses, stakeholders must promptly comply with the registration requirements and maintain up-to-date information. The consequences of non-compliance are severe, making it crucial for companies and directors to prioritize adherence to the CIPC's regulations.