COMPLYING WITH CIPC’S BENEFICIAL OWNERSHIP REGIME

The Companies and Intellectual Property Commission (CIPC) is an agency of the Department of Trade and Industry in South Africa. The CIPC sees to the administrative processes relating to all companies registered within the Republic of South Africa, such as the registration of companies, disclosure of business information, registration of intellectual property as well as monitoring companies’ compliance with, and contraventions of financial reporting standards.

In an attempt to combat money laundering as well as financial terrorism, the CIPC together with the Financial Action Task Force, the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (the “Amendment Act”) was passed.

Which sections did the Amendment Act vary?

The Amendment Act in essence amended five of our major legislative pieces, namely:

  • Companies Act 71 of 2008;
  • Financial Intelligence Centre Act 38 of 2001;
  • Financial Sector Regulation Act 9 of 2017;
  • Nonprofit Organisations Act 71 of 1997;
  • Trust Property Control Act 57 of 1988.
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This article will primarily focus on the amendments affecting the Companies Act 71 of 2008.

In terms of the Amendment Act, CIPC is mandated to collect beneficial ownership information of entities. The purpose of such information collection is twofold:

  1. Firstly, to identify beneficial owners of entities, as at current there is no public record thereof;
  2. Secondly, to reduce and mitigate money laundering as well as financial terrorism by the abuse of legitimate entities.

How is the Companies Act amended by the Amendment Act?

  • The promulgated definitions for ‘affected company’ and ‘beneficial owner’ have been established.
  • Procedures have been developed whereby CIPC can keep accurate and updated beneficial ownership information on all entities.
  • All companies will now have to keep a record of the natural persons who own or control the company in terms of the definition of ‘beneficial owner’, and implement specified timelines within which the company must record any changes in such information
  • All companies are obliged to file a record at CIPC for any natural person who owns or controls the company in terms of the definition of ‘beneficial owner’.
  • Any person who is convicted of offences relating to money laundering, terrorist financing, or proliferation financing activities or is subject to resolution of the UN Security Council is prohibited from registering as a company director.

What is an “affected company”?

An affected company is:

  1. a regulated company as set out in section 117(1)(i), and includes:
    • public company;
    • state-owned company (except those exempted in terms of section 9 of the Companies Act);
    • private company, but only if-
      • more than 10% of its issued securities have been transferred (except between related or inter-related persons) within 24 months immediately before an affected transaction, as defined in section 117(1)(c); or
      • the Memorandum of Incorporation of that company expressly provides that the company and its securities are subject to Part C and the Takeover Regulations of the Companies Act, irrespective of whether the company falls within the criteria set out above.
  1. private companies that are controlled by or a subsidiary of a regulated company as a result of section 2(2)(a) or 3(1)(a)

Do I qualify as a “beneficial owner”?

Per section 1 of the Companies Act, 2008 a beneficial owner is defined as:

An individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company, including through:

  1. the holding of beneficial interests in the securities of that company;
  2. the exercise of, or control of the exercise of the voting rights associated with securities of that company;
  3. the exercise of, or control of the exercise of the right to appoint or remove members of the board of directors of that company;
  4. the holding of beneficial interests in the securities, or the ability to exercise control, including through a chain of ownership or control, of a holding company of that company;
  5. the ability to exercise control, including through a chain of ownership or control, of:
    1. a juristic person other than a holding company of that company;
    2. a body of persons corporate or unincorporate;
  • a person acting on behalf of a partnership;
  1. a person acting in pursuance of the provisions of a trust agreement or
  1. the ability to otherwise materially influence the management of that company.

What has to be filed at CIPC?

Section 33 of the Companies Act, 2008 requires every company to file the following documentation annually:

  • Copy of annual financial statements;
  • Copy of company’s security register;
  • Copy of register of disclosure of beneficial interest.

What is a security register?

A security register, is a record of all issued securities in a company, reflecting the type of security as well as the information of the holder thereof.

Should a company not fall within the meaning of an ‘affected company’ the company must record in its securities register prescribed information regarding the natural persons who are the beneficial owners of the company, in the prescribed form, and must ensure that this information is updated within the prescribed period after any changes in beneficial ownership have occurred.

What is a register of disclosure of beneficial interest?

Such a register contains the information of anyone who holds beneficial ownership, as fully described above, in a company.

The disclosed information includes inter alia, full name, date of birth, identity or passport number, residential and postal address, email address, and the extent of ownership or effective control which the individual has of the company

Who cannot file beneficial interest information?

Entities with the following statuses cannot file beneficial information:

  • Final de-registration (whether voluntary or AR);
  • Voluntary de-registration process (not AR);
  • Final Liquidation;
  • Voluntary liquidation;
  • Provisional liquidation;
  • Suspended;
  • Conversion from CO/CC or CC/CO;

Compliance with the new CIPC Beneficial Ownership regime is not optional and can result in hefty penalties should companies not comply before the 30th of October 2023. Ensure that your company is compliant with the necessary amendments, by contacting Burger Huyser Attorneys to assist you with all your commercial compliance needs.

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