The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, 2022 (“GLAA”) is in full force and has amended the Companies Act 71 of 2008 (“Companies Act”). Since the promulgation of the GLAA, there has been wide-spread panic and confusion about the new requirement that companies disclose their beneficial ownership information to the Companies and Intellectual Property Commission (“CIPC”). Amidst trying to interpret the complex legislative provisions and receiving conflicting communications and guidance from CIPC, it is no wonder that many companies do not even know where to begin! This is brand new territory for everyone and we expect that further guidance will certainly be provided by CIPC over the coming months. For now, we have broken down our interpretation of the legislation and the current guidance offered by CIPC, giving you a 4-step plan for your beneficial ownership filings.
Step 1: Determine whether your company is an “affected company”
The GLAA has introduced a new concept of an “affected company”. The requirements relating to company record keeping and filing of beneficial ownership information, depends to a certain extent on whether a company in question is an affected company or not. This is one of the first questions CIPC will ask the filer of beneficial ownership information, so answering this is the best place to start.
An affected company is a regulated company or a private company that is controlled by or a subsidiary of a regulated company.
A regulated company is: (i) a public company; (ii) a state owned company; (iii) a private company where 10% or more of its shares have been transferred in the last 24 months; or (iv) a company whose MOI provides that that company is subject to the Takeover Regulations.
Step 2: Determine your company’s obligations
In a nutshell, there are three requirements to take note of in relation to the new filing requirements.
Firstly, companies must maintain a record of their beneficial owners with an interest of 5% or more and file it with CIPC.
Secondly, all companies (both affected and non-affected) are now required to file their securities registers with CIPC.
Before moving onto the third requirement, it should be noted that there is a distinction between a “beneficial interest” and a “beneficial owner”. A beneficial interest refers to situations where, for example, a nominee holds shares on behalf of another, with the nominee being the registered owner in the share register and the latter person deriving some sort of benefit from the shares by virtue of a contractual relationship.
This brings us to the third requirement, namely that all companies must maintain a record of beneficial interests in securities. Depending on whether you are an affected company or not, this register may need to be kept separately to your existing securities register and may also need to be filed with CIPC. To further complicate things, a beneficial interest holder would qualify as a beneficial owner, as the definition of beneficial owner in the GLAA covers this.
Step 3: Determine who your company’s beneficial owners are
Beneficial owners are the individuals (or as CIPC likes to say, the “warm bodies”) that ultimately control or derive a benefit from the company in question.
If your company has shareholders who are themselves companies, you have to keep digging and find the “warm bodies” behind those shareholders. This is effectively an exercise in searching all the way up the chain of ownership and control until you find an individual. A fair bit of analysis of company constitutional documents (MOIs and shareholders agreements), share registers and trust deeds (if applicable) would be required.
Step 4: Get your supporting documents together
In addition to submitting the securities register and register of beneficial interests (as applicable), CIPC requires various supporting documents to be submitted when filing beneficial ownership information, including a mandate authorising the filer to file on behalf of the company, certified ID copies of all beneficial owners and a “beneficial ownership disclosure form”, which CIPC has indicated is effectively a corporate structure chart showing the chain of ownership and control.
When is the due date?
It is difficult to say with certainty when companies must do their first beneficial ownership filing. When CIPC first communicated the date, it was 1 October 2023. However, a later communication from CIPC said all companies must file as part of their next annual return cycle. We have heard rumblings in the market of some being of the view that companies cannot even wait that long, and that beneficial ownership must be filed immediately. In light of this, it is important to get this done as soon as possible.
A final note – CIPC has said that listed affected companies and their subsidiaries are not required to file beneficial ownership information.
Still confused? Get in touch and we will be happy to help you navigate this tricky new territory.