Founder: Turnaround Talk
Since the establishment of business rescue, which is entrenched in Section 128(1)(b) of the Companies Act (71 of 2008), there have been many calls from professionals and industry experts for increased regulations and guidelines which would help refine and improve the profession.
In 2009, Rob Davies – the Minister of Trade and Industry at the time – acknowledged that this was a pressing issue and that establishing an industry Ombudsman would be imminent. The formal appointment of this office did not take place, and the Companies and Intellectual Properties Commission (CIPC) has been acting as the de facto industry watchdog in charge of regulatory establishment and oversight.
The CIPC has been busy over the past few years establishing a framework that would benefit the profession. The Commissioner of the CIPC, Adv Rory Voller, has recently been in talks with the incumbent Minister of Trade and Industry – Ebrahim Patel – to Gazette a law which states that lodging Beneficial Ownership Information with the CIPC becomes mandatory, and heavy administrative action may await those who are non-compliant.
In Guidance Notice 2, the CIPC detailed all that you need to know about beneficial ownership.
Definition
The beneficial owner in respect of legal persons is defined as follows:
“‘beneficial owner’, in respect of a company, means an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company, including through
(a) the holding of beneficial interests in the securities of that company,
(b) the exercise of, or control of the exercise of the voting rights associated with securities of that company;
(c) the exercise of, or control of the exercise of the right to appoint or remove members of the board of directors of that company;
(d) the holding of beneficial interests in the securities, or the ability to exercise control, including through a chain of ownership or control, o/ a holding company of that company,
(e) the ability to exercise control, including through a chain of ownership or control, of— (i) a juristic person other than a holding of that company, (ii) a body of persons or unincorporate; (iii) a person acting on behalf of a partnership, (iv) a person acting in pursuance of the provisions of a trust agreement; or
(f) the ability to otherwise materially influence the management of that company;”.
The threshold of 5% of ownership and/or control will be applicable for all entities required to file Beneficial Ownership Information.
Filing of a Securities Register for Companies which are not affected companies as per Regulation 32
A company which does not qualify as an affected company must file their securities register, which should include beneficial interest holders of the securities of that company if they are held by one person for or on behalf of another.
A securities register of a company which is not an affected company must also include information of its Beneficial Owners (Regulation 32 (3) (b)).
Filing of a Beneficial Interest Register for Companies which are affected companies as per Regulation 30A
An affected company is defined as follows:
affected company’ means a regulated company as set out in section 117(1) (i) and a private company that is controlled by or a subsidiary of a regulated company as a result of any circumstances contemplated in section 2(2)(a) or 3(1)(a)”.
An affected company must file its Beneficial Interest register as prescribed in the regulations. The register must confirm with the prescribed requirements.
Companies which are not required to file a register of its Beneficial Owners/Beneficial Interest Holders
Affected Companies listed on a local stock exchange if such information is already kept at such stock exchange or any institution with the authority of collecting and keeping such records
This will also apply to related entities related. I.e.: a subsidiary or an entity controlled by the affected company in question.
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Filing Requirements for Non-Profit Companies
Non-profit companies with members will have to file a register containing details of their members.
In line with the definition of beneficial owner, persons who exercise effective control of a non-profit company have to be included with the filing.
Transitional Arrangements with regard to the filing of Beneficial Ownership of existing companies
Entities incorporated after on and after the 24™ of May 2023 will be required to file the records of their beneficial owner within ten days after such incorporation. Entities incorporated before 24 May 2023 will have to file their Securities Register or Beneficial Interest Register (whichever is applicable to the entity in line with whether it’s an Affected or Not an Affected entity) as part of its Annual Returns filing process from 24 May 2023 which is the date of publication of the final Amended Companies Regulations.
Failure to comply with the provisions relating to the beneficial ownership register requirements /beneficial interest register requirements is an offence in terms of the Companies Act. A compliance notice may be issued in case of non-compliance, and an administrative penalty may be imposed.
Please download the Beneficial Ownership FAQs below.
