Analysing the new disclosure requirements in the General Laws Amendment Act, 2022
- In response to the greylisting by the Financial Action Task Force, the President has signed into law the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act to improve SA’s ability to combat money laundering and terrorist financing
- The Amendment Act has introduced new disclosure requirements and recordkeeping requirements for companies relating to their beneficial ownership
- Companies are now required to maintain registers of their beneficial ownership and submit the information to CIPC
- Companies have until 1 October 2023 to comply with the new disclosure requirements
In December 2022, Parliament passed the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (“the Amendment Act”). The purpose of the Act is to respond to the shortcomings in South Africa’s anti-money laundering and terrorist financing legal framework that were identified by the Financial Action Task Force (“FATF”). After South Africa was greylisted by the FATF for these shortcomings, the Amendment Act was brought fully into effect on 1 April 2023.
The Amendment Act has introduced several consequential new disclosure requirements for companies, the most important of which are briefly discussed below.
The new disclosure requirements
In keeping with the spirit of the Amendment Act, the disclosure requirements in the Companies Act 71 of 2008 (“the Companies Act”) have been expanded. The Amendment Act augments the concept of a “beneficial owner” in South African company law, which is defined as an individual who directly or indirectly ultimately owns the company or exercises effective control, including through:
- the holding of beneficial interests in the securities of the company
- the control of voting rights
- the control of the right to appoint or remove board members
- the control of beneficial interests in the securities of a holding company of that company
- the ability to exercise control of a juristic person other than a holding company, a body of corporate or unincorporate persons, a person acting on behalf of a partnership, or a person acting in terms of the provisions of a trust agreement
- the ability to otherwise materially influence the management of the company.
Only an individual can be considered a ‘beneficial owner’: companies, trusts and close corporations are excluded from the definition in the Amendment Act.
The Amendment Act builds on the concept of an “affected company”, which is defined as referring to a company that is subject to the authority of the Takeover Regulation Panel (“the Panel”) or a private company that is controlled by or a subsidiary of a company subject to the Panel’s authority.
Companies that are not considered as “affected companies” are required to record in their securities register, information regarding the individuals who are the beneficial owners of the company and must furthermore ensure that the information is updated after any changes in beneficial ownership have occurred. A record of the beneficial ownership of the company must also be filed with the Companies and Intellectual Property Commission (“CIPC”) and any changes must be filed with CIPC within a period of five days.
Affected companies are required to establish and maintain a register of persons who hold beneficial interests equal to or exceeding 5% of the total number of securities issued by the company.
Additionally, companies are now required to file with their annual returns, copies of their securities register and a register of the disclosure of beneficial interest (if required) to CIPC. Companies that are required to be audited are also now obliged to submit a copy of their financial statements with their annual returns.
Who will have access to ‘beneficial ownership’ information
The Amendment Act does not entitle the general public to have access to companies’ beneficial ownership information. Only law enforcement and other competent authorities will have access to this information.
Procedure for filing ‘beneficial ownership’ information
Companies must submit their disclosure registers and any supporting documents online to CIPC. The information must be filed by any person who has been designated in writing by the company to file the information on its behalf. The filer must simultaneously present the written mandate authorizing them to file the information.
The following supporting documents should filed when filing information concerning a company’s beneficial ownership:
- Mandate of the filer
- Securities register
- Certified copies of the ID’s or passports (if applicable) of the beneficial owners
- Any other supporting information that CIPC requires.
Companies have until 1 October 2023 to file their beneficial ownership information with CIPC.
The Amendment Act represents an important shift in South African company law, insofar as it makes it more difficult for companies to conceal their true controllers. Whether the Amendment Act is effective at achieving its aims of combating money laundering and terrorist financing, remains to be seen.
If you have any queries regarding the new disclosure requirements, please give us a call and we will gladly assist you.
Written by Arinda Truter and Nicholas Moss