CIPC Mandates The Filing Of Beneficial Ownership Declaration And Securities Register
The Companies and Intellectual Property Commission (hereinafter “CIPC”) has recently published a notice urging directors of companies and members of closed corporations to file their annual Beneficial Ownership Declaration as well as a Securities Register together with their annual returns.
CIPC was mandated to request the annual filing of a Beneficial Ownership Declaration as well as a Securities Register in terms of the amendments to the Companies Regulations and Companies Act 71 of 2008. These amendments, promulgated on the 24th of May 2023, give effect to the Financial Action Task Force (hereinafter FATF) recommendations to bring South Africa’s regulatory framework pertaining to legal persons in line with international Anti-Money Laundering and Counter Financing of Terrorist Activities (AML/CFTA) regulations. This mandate advances this objective by actively promoting transparency within legal persons, where the lack of transparency on beneficial ownership is often abused for money laundering and financing of terrorist activities.
Does this apply to all
companies?
All “Affected” and “Non-Affected,
with beneficial interest to declare” companies must comply by submitting the
requisite documents to CIPC.
“Affected” companies include
inter alia:
·
A
public company (Whether listed or unlisted)
· A
private company (only if the prescribed 10% threshold for transfer of
securities per year is breached)
· State-owned company (unless exempted by the Minister)
“Non-Affected” companies
with a beneficial interest to declare include inter alia:
·
All
companies not qualifying as “Affected” companies but having a beneficial
interest holder or effective control holder.
Who qualifies as
beneficial interest holders?
The aforementioned paragraph
clarified that “Affected” companies must comply by filing a full Beneficial
Ownership Declaration together with a Securities Register, whereas “Non-Affected”
companies may still need to declare beneficial interest by way of filing a
Securities Register. It is patent that the aforementioned criteria also
depend on who qualifies as a beneficial interest holder.
A beneficial interest holder
or ‘beneficial owner’ of a company means anyone who directly or indirectly owns
that company or exercises effective control of that company by way of inter
alia:
·
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
ability to exercise control, including through a chain of ownership or control,
of;
Ø
a
juristic person other than a holding company of that company;
Ø
a
body of persons, corporate or unincorporate;
Ø
a
person acting on behalf of a partnership;
Ø
a
person acting in pursuance of the provisions of a trust agreement; or
·
the
ability to otherwise materially influence the management of that company;
Furthermore, the threshold
for beneficial interest, as conceptualised above, is subject to a 5% threshold
requirement. This means that any affected company with beneficial ownership of
less than 5% does not have to comply with the provisions of beneficial
ownership.
What are the risks of non-compliance?
In instances where a company
is required to file a Beneficial Ownership Declaration and fails to do so
within the prescribed time period, such a company is at risk of incurring significant
penalties.
What is more, the CIPC portal
may not allow certain companies to file their annual returns without the filing
of Beneficial Ownership Declarations. If this is subsequently filed after the
stipulated due date, the company may be issued with late filing penalties,
compliance directives from the Commissioner, or even possible deregistration
of the company. To avoid issues of non-compliance, it is therefore imperative
that companies and closed corporations file these documents timeously on an
annual basis. Companies that have already filed the requisite documents during
the previous submission of annual returns are reminded that the documents must
be filed each year to ensure that the most up-to-date information is kept on
the CIPC Beneficial Ownership and Securities Registry.
Contact Us
Should you have any enquiries
regarding the above, or should you prefer to schedule a consultation, feel free
to contact our office for assistance.
Written by Karl Vermeulen