BY Leonard Bilchitz AND Tevin Ramalu
Navigating South Africa's new Beneficial Ownership Requirements: A guide for companies
In 2021, the Financial Action Task Force (“FATF”) released its Mutual Evaluation Report of South Africa, which contained an assessment of South Africa's effectiveness in combatting money laundering and terrorism financing. The report highlighted specific areas where South Africa needed improvement, notably in providing accurate and current information about beneficial owners of legal entities. It also stressed the importance of imposing sanctions for non-compliance with beneficial ownership obligations.
In response, the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act No. 22 of 2022 (“GLAA”) was enacted. This led to the introduction of the Companies Amendment Regulations, 2023 (“Amendment Regulations”), which includes new sub-regulation 32(3A) and Regulation 32A into the Companies Regulations, 2011 (“Companies Regulations”).
The Amended Regulations require “affected companies” (see below) to establish and maintain a beneficial interest register (“BI Register”) containing information about natural persons holding a beneficial interest of 5% or more of the total number of securities issued by a company. Companies are also responsible for keeping this register up-to-date.
Understanding Beneficial Ownership
To fully comprehend the concept of beneficial ownership as introduced by the GLAA, it is crucial to understand the meaning of the term “beneficial owner”. For the purposes of section 1 of the Companies Act, 2008, as amended (“Companies Act”), a beneficial owner of a company is a natural person who, either directly or indirectly, has ultimate ownership or exercises effective control over the company, including through:
- The holding of beneficial interests in the securities of that company;
- The exercise of, or control of the exercise of the voting rights associated with securities of that company;
- The exercise of, or control of the exercise of the right to appoint or remove members of the board of directors of that company;
- 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;
- The ability to exercise control, including through a chain of ownership or control, of—
a juristic person other than a holding company of that company;
- A body of persons corporate or unincorporate;
- A person acting on behalf of a partnership;
- A person acting in pursuance of the provisions of a trust agreement; or
- The ability to otherwise materially influence the management of that company;
In terms of the amended sections 33(1) and 50 of the Companies Act, all companies are required, when filing their annual return with the Companies and Intellectual Property Commission (“CIPC”), to file, in addition to their annual financial statements (where applicable), their securities register.
All “affected companies” (see below) are required to file a BI Register with the CIPC. This is a register of all-natural and juristic persons who own a "beneficial interest" in a company.
The Companies Act defines a "beneficial interest" in section 1 as:
"The right or entitlement of a person (being both natural and juristic persons), through ownership, agreement, relationship or otherwise, alone or together with another person to:
(a) Receive or participate in any distribution in respect of a company's securities;
(b) Exercise or cause to be exercised, in the ordinary course, any or all of the rights attaching to the company's securities; or
(c) Dispose or direct the disposition of the company's securities or any part of a distribution in respect of the securities,
The definition of “beneficial interest” does not include any interest held by a person in a unit trust or collective investment scheme in terms of the Collective Investment Schemes Act No.45 of 2002.”
An “affected company” is defined as all regulated companies (namely, public companies, state-owned enterprises, and private companies that meet the requirements set out in section 118(1)(c) of the Companies Act) and any company that is controlled by or the subsidiary of a regulated company.
Public companies, the shares of which are listed on a securities exchange (“Listed Companies”), do not have a specific exemption under the Amendment Regulations. However, on 29 May 2023, the Companies and Intellectual Property Commission (“CIPC”) issued a Guidance Note regarding the Amendment Regulations. This guidance note offers a special exemption for Listed Companies. The exemption applies:
- When a Listed Company is already obligated to provide the information required for the BI Register and securities register to a competent authority according to the rules of a stock exchange; and
- To related entities of the Listed Company[i].
When submitting their annual returns to the CIPC, Listed Companies should indicate that, despite being subject to these regulatory changes, they have already furnished the necessary information to the stock exchange or a specific institution (e.g., STRATE or Computershare) in compliance with the relevant provisions of such stock exchange or specific institution(for example, paragraphs 8.63(c), 8.63(e), and 3.83 of the Johannesburg Stock Exchange Listing Requirements (“JSE LR”).
According to the JSE LR, JSE-listed companies are required to establish and maintain a register of beneficial interest disclosures as required by section 56 of the Companies Act and report this to the JSE.
In terms of regulation 30, “affected companies” must maintain specific information, which includes:
For natural persons holding a beneficial interest:
- The full name of the individual.
- The date of birth of the individual.
- The identity number (if South African) or passport number, along with the passport's country of issue and the country of birth (if non-South African) of the individual.
For juristic persons holding a beneficial interest:
- The full name of the juristic entity.
- Registration number of the juristic entity.
- Business, residential, or postal address of the individual or entity. If available, the email address of the individual or entity.
- Confirmation of the person's beneficial interest in terms of the total number of issued securities of that class, whether obtained directly or indirectly, as well as any ownership or effective control over such a company.
Where a company does not fall within the definition of an ”affected company” (“Non-Affected Company”), such Non-Affected Company is simply required to keep a record of all of the beneficial owners of the company within its existing securities register in terms of regulation 30 of the Amendment Regulations.
The Amendment Regulations prescribe the following information, which must be recorded by a Non-Affected Company in its existing securities register in respect of each beneficial owner:
- The full name
- Date of birth
- Identity number (if South African) or passport number (if non-South African).
- Residential and postal address
- Email address if available, unless the person has declined to provide an email address.
- Confirmation as to the scope of participation in and extent of ownership, or effective control of, the company.
- The name and unique identifying number of the registered holder of the security.
- The number, class, and in the case of a certificated security, the distinguishing numbers of the security.
Filing the BI Register with the CIPC is conducted online using their designated form and requires the submission of supporting documents, including a board resolution mandating the filer (if not a director of the relevant company), certified identity documents or notarised passport copies of beneficial owners (dated within three months), and the company's securities register.
Submission of Filings
It is essential to emphasise that under the Companies Act, both a company's securities register and beneficial interest Register must remain updated. Any modifications to these registers must be reported to the CIPC within 10 business days of the changes being made in either the securities register or the BI Register.
For companies established before 24 May 2023, the initial filing of their securities register and/or BI Register, as applicable, is part of their annual return filing process. Companies incorporated on or after 24 May 2023, have a 10-day window following their incorporation to submit the records of their beneficial owners.
In subsequent filings, if no changes have occurred in the BI Register or securities register throughout the year, the same information that was filed in the previous year must be re-submitted to the CIPC, aligning with the annual returns deadline.
Penalties for Non-Compliance
Non-compliance with these requirements constitutes an offence under the Companies Act.
Non-compliant companies may receive a compliance notice in terms of section 171 of the Companies Act, and an administrative penalty may be imposed as a consequence in terms of section 175 of the Companies Act.
ENS' Corporate Commercial team aims to offer support to clients in understanding the regulatory framework, mitigating risks and safeguarding companies' adherence to the Company Act. If you'd like to get in touch, visit the page here.
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