South Africa has introduced the compulsory registration of company and trust beneficial ownership on 1 April 2023. The implementation of the register is spurred by the findings of the Financial Action Task Force (FATF), which showed that law enforcement in South Africa faces challenges in obtaining adequate and up-to-date beneficial ownership information about companies and trusts in order to combat money laundering and the financing of terrorist activities. This amendment to the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (GLAA) will require companies and trusts to provide information on their beneficial ownership to the Companies and Intellectual Property Commission (CIPC) and the Master of the High Court respectively.
In response to the findings contained in the FATF report, the GLAA was promulgated in December 2022. The GLAA requires companies and trusts to keep a record of natural persons who own or control the company or trust assets. It also provides for a system through which the Companies and Intellectual Property Commission (CIPC) and the Master of the High Court can keep beneficial ownership information.
In respect of a company, a ‘beneficial owner’ is defined in the Companies Act 71 of 2008 as an individual who directly or indirectly, ultimately owns the company or exercises effective control of the company. Even where a company may have a layered ownership structure, this definition will trace the beneficial owner up the structure to a warm body at the top.
In terms of a trust, a ‘beneficial owner’ is defined in the Trust Property Control Act 57 of 1988 (TPCA) as a natural person who directly or indirectly owns the relevant trust property or exercises effective control of the administration of the trust.
The rules applicable to companies and trusts are not identical and persons who act as directors of company and as trustees of a trust should familiarise themselves with both sets of rules.
For companies, non-compliance with the rules could result in a fine of 10% of its turnover during the period of non-compliance, or R1 million, whichever is greater. For trusts, non-compliance could result in a trustee being fined up to R10 million, and/or imprisoned for up to five years. Compliance with the new compulsory registration of company and trust beneficial ownership is therefore essential to companies and trusts alike.
Contact us today for more information.