CIPC Beneficial Ownership and what is required
The Companies and Intellectual Property Commission (CIPC) is to keep a register of beneficial ownership (BO) for companies and close corporations that will serve as a repository of natural persons who own or exercise control over legal entities registered with the CIPC.
This move is aimed at assisting law enforcement with relevant information during their investigations about the ultimate owners or controllers of an entity, as a result of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (GLAA).
In addition to amending other pieces of legislation, the GLAA has led to the Companies Amendment Regulations, 2023 (Amendment Regulations) which, through the introduction of new sub-regulation (32(3A)) and Regulation 32A, places a duty on companies to “establish and maintain a register of persons who hold beneficial interest equal to or in excess of 5% of the total number of securities … issued by the company” while also ensuring that the records are kept up to date.
What is BO and who must be identified?
A beneficial owner means the individual (or individuals) who, directly or indirectly, ultimately own or exercise effective control in an entity. This means the chain of ownership must be followed through to the ultimate holding party (parties) (BO information).
Who must file BO information?
All companies and close corporations registered with the CIPC are required to file BO information except for certain listed companies and non-profit companies with no members. The duty to file BO information extends to dormant entities (even if in process of deregistration) and external companies.
Although applicable to all companies, the Amendment Regulations distinguish between different types of companies and the corresponding requirements differ between these types of companies as follows:
This is a new definition introduced by the Amendment Regulations. An Affected Company is defined as:
- a regulated company that is, a public company, a state-owned company (unless exempted by the Minister of Trade, Industry and Competition in terms of 9(2) of the Companies Act 71 of 2008 (Companies Act)) or a private company if more than 10% of its issued securities have been transferred (other than between related or inter-related persons) within 24 months immediately before the assessment is done, or its memorandum of incorporation expressly provides that parts B and C of the Companies Act and the Takeover Regulations shall apply to the company and its securities; or
- a private company that is a subsidiary of a regulated company (directly or indirectly).
An Affected Company is required to establish and maintain a register of the persons who hold BO equal to or in excess of 5% of the total number of securities of that class issued by the company, together with the extent of such BO, and to ensure that this register is updated. This is in addition to maintaining its existing security register.
A company that is not an Affected Company
Where a company does not fall within the definition of an Affected Company, the company is simply required to keep a record of all the beneficial owners of the company in its securities register. The submission requirements to CIPC are still extensive and require specialist knowledge of the Companies Act and CIPC requirements.
Consequences of non-compliance
A compliance notice may be issued in terms of section 171 of the Companies Act and an administrative penalty of more than R1m or 10% of the entity’s turnover may be imposed in terms of section 175 of the Companies Act in the case of non-compliance.
How Can I Meet My Obligations?
As your company compliance administrators, we already have access to most of the information that will need to be submitted and we can apply our expertise in the fiduciary field to help you navigate these changes to the Companies Act legislation to ensure compliance.