The Companies and Intellectual Property Commission (“CIPC”), which administers about 2.1 million active companies in South Africa, has recently introduced the requirement for companies to register their beneficial owners (“BOs”) as part of their annual returns process. The introduction of BO registration is aimed at promoting transparency and combating financial crimes such as money laundering and corruption.
BOs are individuals who own or control a significant portion of a company’s shares or voting rights, or who exercise significant control over a company’s management or decision-making processes. By identifying and registering BOs, the CIPC aims to increase transparency around who owns and controls companies in South Africa and to prevent the use of companies for illegal or illicit purposes.
The new BO registration requirements apply to all companies registered in South Africa, regardless of their size or structure. Companies are required to identify and register their BOs through the CIPC’s online portal as part of their annual returns process. Failure to comply with the new requirements may result in penalties and fines.
The introduction of BO registration is a positive step towards promoting transparency and accountability in South Africa’s business environment. It is also in line with international best practices, as many other countries have already introduced similar measures to combat financial crimes.
However, there are some concerns about the practical implications of the new requirements, particularly for small and medium-sized enterprises. Some entrepreneurs have expressed concerns about the additional administrative burden and costs associated with identifying and registering their businesses. In addition, the Commission describes that only law enforcement and “competent authorities” will be allowed access to the registry. The fact that the general public (and lawyers) won’t have any access to the registry might defeat the purpose…
It is worth noting that some countries do have regulatory bodies that maintain share registries. This, however, is unfortunately not the case in South Africa. Instead, the responsibility for maintaining an accurate share register rests with the company, which must ensure that the information is complete and up-to-date.
One cannot help but ask why the Commission opted for a BO registry and not the implementation of a mandatory share register filing. While the BO requirements introduced by the CIPC are not directly linked to the greylisting of South Africa by the FATF, they are part of a broader effort to improve transparency and accountability in the country’s business environment, which may assist in addressing further concerns regarding money laundering and other illicit activities.
Overall, the introduction of BO registration is a positive development for South Africa’s business environment. Despite the inevitable challenges in implementing the new requirements, the accountability and benefits of increased transparency — at least for the relevant authorities and law enforcement — are likely to outweigh any short-term costs or challenges.
The deadline for being compliant is October 1, 2023. Reach out to Centurion Law Group today should you require assistance with the entire process.
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Author: Leon van der Merwe, Director Centurion Law Group, South Africa.