What is Beneficial Ownership? 

Beneficial Ownership refers to the ownership structures of legal entities, such as companies or trusts. By identifying beneficial ownership structures, one is establishing exactly which individuals benefit from the privileges associated with ownership of a legal entity – benefits may include profits and/or leadership authority. 

Sometimes, the actual owner of a company is not the same individual under whose name the company’s title is listed on paper. In other words, although the title for Company X may be under the name of Mr Allen, Company X may actually belong to Mrs James. In this case, Mrs James is a beneficial owner. 

Establishing the beneficial ownership of an entity can be challenging. Ownership structures may be designed to be highly convoluted and complex – either legally or illegally so – for several reasons. It should be noted that beneficial ownership structures are legal, so long as they are explicitly declared. 

When beneficial ownership structures are illegally constructed, they are most often done for money laundering and tax evasion. The potential for beneficial ownership structures to facilitate illegal activity means that it is important for countries to regulate how beneficial ownership structures may legally be used, so as to reduce the chance that they are used to fund criminal activity. 

To find out more about beneficial ownership, you can read our comprehensive guide here. 

What New Powers Has the CIPC Been Given? 

In South Africa, the Companies and Intellectual Property Commission (CIPC) acts as the regulator for all companies in South Africa. For many years, the CIPC held centralized records of information pertaining to companies, such as director details.

However, the CIPC has never maintained a record of who the shareholders of companies are or a central record of Beneficial Ownership structures for a company.

Until now. 

New amendments to existing laws now empower the CIPC to demand that all companies provide accurate and up-to-date information concerning every beneficial ownership associated with a company. This means that the CIPC will now hold a central registry of all beneficial ownership structures for companies in South Africa, thereby promoting greater transparency and accountability in all business dealings in the country. 

These new powers stem from amendments to two acts, which are as follows: 

• The 2022 General Laws (Anti-Money Laundering and the Combating the Financing of Terrorism) Amendment Act. 
• The 2022 Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act.

Combined, these two amendments have significant implications for most businesses operating in South Africa. 

How are Companies Affected by the New Beneficial Ownership Laws?

Under these new South African laws, the exact Beneficial Ownership compliance obligations differ depending on the specific company and the nature of the industry.  

Some general compliance obligations for businesses/companies in SA may include: 

• All companies must declare and formally register their beneficial ownership structures with the CIPC. 
• All individuals and/or entities that hold more than 5% beneficial ownership of a company or close corporation must submit a register of beneficial owners to CIPC.

Notably, however, ThisIsMe is an identity verification, KYC and AML specialist company. We provide the digital tools that empower South African companies to conduct a wide range of tasks related to identity verification, KYC and AML/CFT. 

ThisIsMe is not a law firm and will never provide legal advice to companies. We have worked alongside several compliance specialist companies, such as Moonstone Compliance, who are better suited to helping your business understand its regulatory compliance obligations. 

Beyond legal advice, ThisIsMe will provide your company with every digital tool necessary to meet your identity verification and data validation needs, regardless of industry. 

AML/CFT, Politically Exposed Persons Checks and Sanctions Checks for South Africa 

As South Africa’s leading provider of identity verification, due diligence and risk management solutions, ThisIsMe provides world-class KYB solutions that can help your business secure its transactions and verify whom it does business with. To experience our full suite of solutions and find out how we can empower your business with class-leading tools, contact our team here.