The Companies and Intellectual Property Commission (“Commission”) participated in a mutual evaluation process conducted by the Financial Action Task Force (“FATF”) in order to assess the country’s laws and measures that were in place to combat money-laundering and the financing of terrorism.

Nearly a month after it was announced on 10 March 2023 that South Africa was greylisted the Minister of Trade, Industry and Competition, in consultation with the Commission[1] published for public comment the draft Companies Amendment Regulations (“Regulation Amendments”). The final Regulation Amendments were published in the government gazette on 24 May 2023 and came into effect on the same day.

The Regulation Amendments are largely aimed at clarifying and enhancing certain provisions of the regulations to the Companies Act—including regulations 5, 30, and 32—and enhancing the disclosure and reporting requirements of companies – by the insertion of regulation 32A, 32B, and 121A – as a result of the General Laws Amendment Act, 2022.

Prior to the Regulation Amendments coming into effect, certain amendments had already been made to the Companies Act. These amendments give effect to the establishment of the beneficial owner register which the Commission is to keep a record of and will ensure that authorities have timely access to accurate and up-to-date beneficial ownership information.

These amendments to the Companies Act came into effect on 1 April 2023 and companies have six months from this date to comply with the requirements. It is important to note that the information filed with the Commission will not be made available to the public.

In terms of section 56 (7)(aA) of the Companies Act, an affected company must establish and maintain a register of persons who hold beneficial interests equal to or in excess of 5% of the total number of securities of that class of securities issued by the company and ensure that this register is always kept up to date. The Companies Act defines the holder of a beneficial interest when used in relation to a company’s securities as to mean “the right or entitlement of a person, through ownership, agreement, relationship or otherwise, alone or together with another person to:

(a) receive or participate in any distribution in respect of the company’s securities;

(b) exercise or cause to be exercised, in the ordinary course, any or all of the rights attaching to the company’s securities; or

(c) dispose or direct the disposition of the company’s securities, or any part of a distribution in respect of the securities,

but does not include any interest held by a person in a unit trust or collective investment scheme in terms of the Collective Investment Schemes Act, 2002.”

Section 56 (12) of the Companies Act further provides that companies which do not fall within the meaning of an ‘affected company’ must file a record with the Commission, information regarding the individuals who are the beneficial owners of the company and must ensure that this information is updated by filing notices with the Commission within the prescribed period after any changes in beneficial ownership have occurred.

The Companies Act defines the term “Beneficial Owner” quite widely in section 1 to mean in respect of a company “an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company, including through:

(a) the holding of beneficial interests in the securities of that company;

(b) the exercise of, or control of the exercise of the voting rights associated with securities of that company;

(c) the exercise of, or control of the exercise of the right to appoint or remove members of the board of directors of that company;

(d) the holding of beneficial interests in the securities, or the ability to exercise control, including through a chain of ownership or control, of a holding company of that company;

(e) the ability to exercise control, including through a chain of ownership or control, of-

(i) a juristic person other than a holding company of that company;

(ii) a body of persons corporate or unincorporate;

(iii) a person acting on behalf of a partnership;

(iv) a person acting in pursuance of the provisions of a trust agreement; or

(f) the ability to otherwise materially influence the management of that company.”

It is also important to note that an “affected company” is a public company, certain state-owned companies, and a private company, but only if it has transferred more than 10% of its issued securities, other than by transfer between or among related or inter-related persons, within the period of 24 months, or if the memorandum of incorporation of such company expressly provides that the company is a regulated company.

It is not yet clear what the consequence for failure to comply with these requirements will be. However, it is worth noting that Section 214(1)(b) of the Companies Act makes it an offence to, with a fraudulent purpose, knowingly provide false or misleading information in any circumstance in which the Companies Act requires the person to provide information or give notice to another person.

The Commission has published on their website a step-by-step guide aimed at guiding filers on the steps of filing beneficial ownership details via the online automated process of filing.

Written by Robin Monteiro, Associate & Werner De Waal, Partner; Fasken