by Nicola Mullineux
In response to South Africa’s greylisting by the Financial Action Task Force (“FATF”) for non-compliance with the international standards aimed at preventing money laundering and terrorist financing, the legislature elected to amend Companies Act, 71 of 2008 (“Act”). The purpose of these amendments is to rectify the deficiencies identified by the FATF, with the ultimate aim of eradicating the greylisting imposed.
Beneficial interest/ownership compliance
Consequently, every company is now required to submit its securities registers to the Companies and Intellectual Property Commission.* In some instances the securities register will include a record of beneficial ownership and beneficial interest, and in others, a company is required to submit a separate register of beneficial interest in addition to its securities register. Knowing what your company or close corporation is required to submit is essential because the filing of annual returns is now dependent on beneficial interest/beneficial ownership compliance.
Beneficial owner
The Act defines a beneficial owner of a company as an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company and goes on to mention 6 specific scenarios which, for the purposes of the Act, amount to beneficial ownership.
Beneficial Interest on the other hand is defined as “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 securities of a company; (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 of or direct the disposition of the company’s securities, or any part of a distribution in respect of the securities”.**
Beneficial interest holder
Although a beneficial interest holder can also be a beneficial owner, this is not always the case. Beneficial owners are the ultimate warm bodies who own or exercise control over a company, whereas beneficial interest holders include every level up the chain and do not necessarily have to be individuals. It is therefore possible for an individual to be both a beneficial interest holder and a beneficial owner, but it is only possible for a corporate body to be a beneficial interest holder.
Register of beneficial interest
For more information about compliance with the most recent additions to the Act and for guidance on whether your company is required to submit its securities register which will include a record of beneficial ownership and beneficial interest or whether your company is required to submit a separate register of beneficial interest in addition to its securities register, please contact any member of the Herold Gie Corporate Commercial Department as indicated below.
* While reference in this article is only made to companies and securities registers, these terms should be read to include the equivalent term in respect of close corporations.
** Securities include shares, debentures or other instruments, irrespective of their form or title, issued or authorised to be issued by a profit company.
Nicola Mullineux is currently a Senior Associate at Herold Gie Attorneys, Cape Town. She graduated from Stellenbosch University in South Africa in 2012 and 2014 with a BComm (with law subjects) and postgraduate LLB respectively and was admitted as an attorney, conveyancer and notary public in 2017.
More articles by Nicola
In response to South Africa’s greylisting by the Financial Action Task Force (“FATF”) for non-compliance with the international standards aimed at preventing money laundering and terrorist financing, the legislature elected to amend Companies Act, 71 of 2008 (“Act”). The purpose of these amendments is to rectify the deficiencies identified by the FATF, with the ultimate aim of eradicating the greylisting imposed.