The New CIPC BO Register to tackle issues linked to South Africa AML grey listing
South Africa was greylisted by the Financial Action Task Force (FATF). The greylisting classifies South Africa as a jurisdiction that is lacking in systems that tackle anti-money laundering and counter-terrorism financing.
Being greylisted means South Africa is essentially now under the spotlight and would be required to work together with the FATF to address the areas of concern. Amongst the issues were the deficiency in record-keeping and ability to track the beneficial ownership of Companies. Companies were identified as the vehicles used most frequently for money laundering and financing of terrorism.
South African legislation has been adapted to address some of the concerns. There have been two amendments passed by parliament:
-
2022 General Laws Amendment Act
-
2022 Protection of Constitutional Democracy Against Terrorism and Related Activities Act
These pieces of legislation have thus led to amendments affecting:
-
The Companies Act of 2008
-
The Trust Property Control Act
-
2017 Financial Sector Regulation Act
So why a Beneficial Ownership Register?
Before the BO register, it was exceedingly difficult for law-enforcement to track the ownership of companies, and this hindered their ability to enforce the law. The Companies Act of 2008 is now changed whereby CIPC has the right to insist on the lodgment of the BO Register, as well as the Securities Register of Companies.
CIPC now has the power to collect information
The Companies and Intellectual Property Commission (CIPC) regulates Companies in South Africa and maintains records of Company and Director amendments. The deficiency as discovered bt the FATF related to the records of beneficial ownership, and these were not centrally managed and accessible before. This has now changed. Law enforcement will now have a triangulation of information and the various bodies will now speak to one another. This will mean amongst them all they will have what law enforcement will need to act.
What is the purpose of the BO Register
The recent amendments to legislation have led to the changing of the Companies Act and the mandate of CIPC to maintain up to date beneficial ownership records in the form of a BO Register. The BO Register will indicate the ownership of an entity and individuals/entities that have a beneficial relationship. Thus, the BO register tackles the direct and indirect beneficial relationships to expose them to the naked eye.
What are the new requirements to comply for South African companies
-
The Companies Act Requires a securities register to be submitted with annual returns
-
Disclosure of beneficial relationships in the form of a register
-
If not affected by the BO legislative requirements, then at a minimum the securities register will have to be submitted
-
Changes are to be submitted at a minimum annually or immediately if there are any changes throughout the year
-
All persons / entities owning more than 5% shareholder/interest must be disclosed in the BO Register
-
Companies with changes of 10% or more in their shareholding in the past 24 months will have to comply with Part C of the Companies Act
-
Public and State-owned enterprises that aren’t exempt will now have to comply
What is a beneficial owner
A natural person who directly or indirectly owns 5% or more of a company. It is also a person who exercises effective control over the entity. Trusts would not be beneficial owners although they will be listed to allow for tracing back to the master of the court. Their beneficiaries will be traceable by the master of the court.
When is this due
Companies have been given 6 months to comply as from 1 April 2023. Non-compliance can lead to a fine of 10% of the company's turnover or a maximum of R1million.
When must changes be lodged
Changes in the ownership must be lodged within five days. These changes must be lodged in a BO Register.
Can the BO Information be accessed by the public
The BO Register can only be accessed by authorized law enforcement and the detail thereof will thus not be available to the public.
Who is responsible for the BO Register
The buck stops with the Directors as it is their duty to maintain the registers and update CIPC on changes. Third parties i.e. accounting firms and secretaries can be mandated to assist, however should non-compliance be uncovered; it will be the directors that will be held accountable.
What happens if you don't adhere to the BO Register regulations
Failing to adhere to the new regulations could result in any of the following:
- Investigations
- A Compliance notice
- Severe interest and penalties
- Directors can be disqualified from being Directors
Do you need a quote for your BO Register
Contact our team via any of the following channels to get a proposal for your personal income tax services:
Subscribe to our newsletters.
Disclaimer:
The views or opinions expressed on this site are solely those of the original authors and other contributors. The material and information contained on this website is for general information purposes only.
This information is for general purposes only. Don't use this information for making business, legal and tax decisions without consulting a professional.
We do not make any express or implied representation, as to the completeness or accuracy of the information published.
Tax law changes regularly, and any tax information on this site might be outdated.
Links to this website may lead to other websites outside our control and we accept no liability in respect thereof.
ZPA accepts no liability for any loss or damage arising from the use of any material on this site.
