Understanding Beneficial Ownership – Regulations at CIPC
Filing Beneficial Ownership information at CIPC has become mandatory for businesses completing their Annual Returns as of December 11, 2023. This was recently announced with Notice 67 of 2023 by the CIPC, which communicated the latest requirements.
Since January 2024, South Africa has intensified its Beneficial Ownership (BO) regulations to enhance transparency and combat financial crimes. These changes are part of South Africa’s efforts to address deficiencies identified by the Financial Action Task Force (FATF) and to improve its anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks.
Trends from the Financial Intelligence Centre show that criminals often use legal people, trusts, and partnerships to hide who owns or controls money that comes from or is meant to be used for illegal activities. Criminals do this by setting up multiple levels of ownership, which makes it hard to find the real owner of the legal person, trust, or company.
This makes the Beneficial Ownership process critical to combat crime.
Stress-Free Beneficial Ownership Registration
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What is Beneficial Ownership at the CIPC?
A 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.
Here’s an example:
Let’s say John owns 60% of the shares in Company XYZ, giving him a majority vote in company decisions and the power to appoint or remove board members. Additionally, through a chain of ownership involving a holding company, he can influence the management and strategies of Company XYZ. Therefore, John is considered the ‘beneficial owner’ of Company XYZ and his details will be on the Beneficial Ownership Register.
Here's a short video explaining Beneficial Ownership:
Who Are the Beneficial Owners?
Why was Beneficial Ownership Regulations implemented in South Africa?
Before these new regulations, companies were not required to disclose their Beneficial Ownership or shareholding information to entities like the CIPC. These issues were treated as confidential matters and were managed internally by the company through its share register, shareholder agreements, and the like.
However, in response to these fresh regulations set out by the SA Government, the CIPC has made it clear that they have collaborated closely with various regulatory and law enforcement bodies to establish a system for “gathering Beneficial Ownership information with the aim of cross-referencing this information.” These regulatory and law enforcement entities encompass the South African Revenue Service (SARS), the Financial Intelligence Centre (FIC), and the Financial Sector Conduct Authority (FSCA).
The recent obligation has put companies in the spotlight, forcing them to disclose their Beneficial Ownership to the CIPC. Consequently, the era when individuals with hidden interests in a company could go unnoticed is now over. This has various consequences for anyone holding valuable assets or involved in intricate ownership arrangements. The new regulations empowers government bodies such as SARS to go through your ownership structures with a fine tooth comb and take you to task.
This also, of course, affects the compliance of Annual Returns submission directly. Find out more here.
When is the deadline for filing Beneficial Ownership at CIPC?
The deadline for submitting the first round of Beneficial Ownership register with the CIPC was May 24, 2024. Companies had little time to finalise their ownership structures and comply with beneficial ownership requirements.
All companies registered before 24 May 2023 should complete their beneficial ownership register as part of their annual returns filing process. Companies registered on or after 24 May 2023 must complete their beneficial ownership register within 10 days of incorporation.
Since July 1, 2024, the CIPC has enforced a “hard-stop” where annual returns cannot be filed without up-to-date beneficial ownership information.
What these deadlines mean for You?
Avoid deregistration of your company. Up-to-date Beneficial Ownership information is now a requirement to submit your Annual Returns at the CIPC. This requirement will be phased in across all annual return platforms. Mandatory from April 1, 2024, the aforementioned submission of Beneficial Ownership at CIPC will be required.
What you need to do to ensure you protect your business?
- Complete your Beneficial Ownership information.
- Once your Beneficial Ownership is complete, you can file your Annual Returns at CIPC.
- As soon as your Annual Returns are submitted, your business will be protected against deregistration.
What information and documents are required to file Beneficial Ownership?
Beneficial Ownership and the Central Suppliers Database (CSD)
Companies who do business with the Government and makes use of the Central Supplier Database (CSD) also requires BO Compliance. The aforesaid encourages all CSD-registered suppliers to update their beneficial ownership at CIPC as soon as possible.
What does this mean for suppliers who are registered with CSD?
Suppliers who haven’t changed their Beneficial Ownership information could face big problems, such as;
- Failure to Follow: Not updating control information could mean that you are not following government rules, which could lead to fines for your business.
- Problems with Verification: Wrong or out-of-date information can make it hard to verify on the CSD, which could slow down business processes.
- Opportunities Lost: If suppliers don’t follow the rules or have problems with proof on the CSD, they might miss out on tenders and contracts.
For more information on Beneficial Ownership and the CSD update, this article will be very helpful.
What Happens If You Don't File Your Beneficial Ownership?
The CIPC noted that failure to file beneficial ownership information will constitute non-compliance and may result in a court-ordered administrative fine of either 10% of the non-complying company’s turnover or R1 million, whichever amount is greater. Non-compliant entities may also be deregistered, halting operations and access to assets. The state may seize the assets of deregistered companies. Business bank accounts may be suspended, affecting payroll and transactions. Providing false or inaccurate BO information is an offense under the Companies Act, leading to enforcement actions.
This adds a significant burden on South African Businesses.
Fortunately, our team of specialists can assist to file Beneficial Ownership register with CIPC at minimal cost.
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New Beneficial Ownership regulations mean full disclosure is no longer optional. Avoid penalties, make sure your company meets the latest CIPC requirements.
Why Beneficial Ownership Registration Is Important
South African SMMEs can reach long-term growth only by following the rules and being honest. Registration of beneficial ownership is not just a legal requirement; it also shows that your company is honest and follows the best global practices for running a business. By going through this process, you protect your business from financial crime, make it more appealing to investors, and help make South Africa’s business world more open and responsible. Read this article for more information on how Beneficial Ownership benefits SMMEs in South Africa.
Finally, we want to stress how important it is for all involved parties to take the beneficial ownership registration process very seriously. Compliance isn’t the only benefit; it also creates a company environment where trust, openness, and responsibility are very important.
