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What is Beneficial Ownership?

How to comply with the CIPC reporting requirements

The CIPC recently (1 April 2023) implemented a new register called the Beneficial Ownership (BO) register in an attempt to establish who owns or exercise control over which companies.

In layman’s terms, BO in respect of a company means, an individual who, directly or indirectly, ultimately owns that company or exercises effective control over that company for tax or financial purposes.

This new register is to assist law enforcement with relevant information when it comes to their investigations of who the ultimate owners of an entity are and to try and decrease the risk of abuse for money laundering and terror financing activities.  

The register to be kept is for the applicable companies and close corporations to submit any BO information relating to that entity. Anyone with more than 5% BO of a company or close corporation must submit (file) with the CIPC, the requisite information. It is however important to note that you need to be registered on the CIPC website and you can only file the BO declaration for a company where you are listed as one of the share holders / members of the company or if you written permission to act on the company’s behalf.

It is accepted that the filer responsible for filing BO information of any applicable entity, has been mandated in writing by the company or close corporation, to tend to same on behalf of the entity.

This written and signed mandate, received by the filer, also forms part of the supporting documentation that must be uploaded to the Commission, upon filing of the BO information. It is accepted that the filer has been provided with the full information required to tend to the BO filing on behalf of the entity, and the agreement above relates to the filer confirming that he/she is attending to the instructions of the entity on whose behalf they are filing.

The mandate should include the following:

  • The mandate may be in the form of a letter, a resolution or power of attorney, providing a specific mandate by the declaring entity to an individual (natural person) to submit BO information, together with mandatory supporting documents, to the CIPC.
  • The mandate must be on a company / close corporation letterhead of the declaring entity;
  • The mandate must be provided to a natural person (not a juristic person) who is in possession of a valid CIPC customer code, to be used when filing and the full names, surname and ID number of the Page 6 of 18 mandated person (filer) must be indicated in the mandate, accompanied by a certified ID copy of the filer.
  • Also, the mandate must be signed by at least 50% +1 of the directors of the company (ordinary resolution requirements), and all of the members of a CC.

The following types of companies are required to file the BO information:

  • Profit companies;
  • Non-profit companies;
  • External companies;
  • Close Corporations 

There are different types of beneficial ownership / effective control:

  • The holding of beneficial interest in the securities of a company; 
  • Control over voting rights, or control over the exercise of voting rights associated with securities of a company;
  • The exercise of the right to appoint / remove members of the board of directors of a company, OR control over the exercise of the right to appoint / remove board members;
  • The holding of beneficial interests in the securities of a holding company, (through a subsidiary) OR the ability to exercise control (including through a chain of ownership) of a holding company through its subsidiary;
  • The ability to exercise control, through a chain of ownership, of
  • (i) A juristic person other than a holding company of that company; (ii) A body of persons corporate or unincorporate (i.e body corporate of an estate – NPC); (iii) A person acting on behalf of a partnership; (iv) A person acting in pursuance of a trust or agreement (i.e trustees, beneficiaries of trusts, beneficiaries of an agreement);
  • The ability to otherwise materially influence the management of that company – effective control.  Page 9 of 18  - State owned companies (SOC’s) will also be required to file BO information, unless exempted by the Minister in terms of section 9(2) of the Companies Act.  

Once you have completed the BO-register on the CIPC website, please submit the following supporting documentation:

  • Mandate – every person mandated to file beneficial ownership information on behalf of a company, must be mandated in writing to do so, and such mandate must be uploaded to the CIPC. The filer is mandated by the company itself, and thus the mandate can be in the form of a signed, director’s or shareholders’ resolution / letter / power of attorney. Any person can file beneficial ownership information on behalf of an entity, as long as the mandate is in place. This includes, company secretaries, attorneys’ firms, auditors, secretarial companies and even the directors of the company.
  • Certified ID / passport copy – a correctly certified ID / passport copy for each beneficial owner saved, must be uploaded to the CIPC. Uncertified identification copies; incorrectly certified; or certification older than 3 months will invalidate the beneficial ownership filing.
  • Securities register – section 33(1)(Aa) of the Companies Act – every company must file a copy of its securities register with the Commission annually – securities register contains all the information relating to shareholders of a company (legal owners). Within each company’s securities register, the prescribed BO-information must be recorded (section 50). Securities registers filing with Commission are not applicable to affected companies.
  • Beneficial Interest register – section 56(7)(aA) – affected companies must establish and maintain a register of beneficial interest in securities (in issue), the extent of the beneficial Page 13 of 18 interest and ensure that the register is updated with any changes – must be filed with CIPC (section 56(14)).
  • Beneficial ownership disclosure form – complex ownership structures, inclusive of juristic persons, trusts, etc. must be indicated in this form.

When would you need to submit the BO?

Existing companies are required to submit information on beneficial ownership to the CIPC in line with the annual returns anniversary date and companies formed after 24 May 2023 need to submit their beneficial ownership information within 10 days of the incorporation.

In closing:

it is important to remember that it remains the responsibility of the directors of companies and members of close corporations as part of their due diligence and governance duties to ensure that the BO-filing (as and when applicable) is facilitated.

Therefore, when providing a mandate to any person to file beneficial ownership information on behalf of the entity, directors and members must ensure that the information is correct and valid at all times.

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