Understanding the New Rules for Beneficial Ownership in South Africa – Complex Structures
Posted by Accounting Weekly on 02/09/2024, view original post here.
The Companies and Intellectual Property Commission (CIPC) in South Africa has made an important change to how businesses report who really owns or controls them. Starting from 23 August 2024, the CIPC’s system now allows companies to report more complicated ownership structures. This update is especially important for companies where the real owners are hidden behind layers of other entities, like trusts or other companies.
What is Beneficial Ownership?
Beneficial ownership refers to the people who truly own or control a company, even if their names don’t appear directly on official documents. The main goal of reporting beneficial ownership is to make sure that the real owners are known, especially when the ownership is hidden behind other entities.
The New Changes
Before this update, the CIPC’s system could only handle simple ownership structures. Now, the system can deal with more complex setups where multiple layers of ownership are involved.
Here’s what you need to know:
- Complex Ownership Structures: The system now allows companies to report ownership even when the first layer of ownership is another company, a trust, or a nominee shareholder (someone who holds shares on behalf of another person). This means the system can now trace ownership up the chain to find the real owners.
- Multiple Layers: If a company has a complicated ownership structure with many layers, they will still need to fill out a special Disclosure Form to show all the layers. This helps to make sure that every part of the ownership is reported.
- Reporting for Each Entity: Each company or trust in the ownership chain must also report who its beneficial owners are. This ensures transparency throughout the entire structure.
Example of Tiered Beneficial Ownership
Imagine Company A is owned by Company B, which is in turn owned by Trust C. The beneficiaries of Trust C are Mr. X and Mrs. Y, who are the real owners (beneficial owners). Under the new rules:
- Company A would report that it is owned by Company B.
- Company B would report that it is owned by Trust C.
- Trust C would report that Mr. X and Mrs. Y are the real owners.
This way, the CIPC can trace the ownership from Company A all the way to the real people who own it, Mr. X and Mrs. Y.
Why This Matters
These new rules are designed to make sure that the true owners of companies are known, even when ownership is hidden behind layers of other entities. This is important for transparency and helps prevent illegal activities like money laundering.
For businesses, this means they need to be careful and thorough in reporting who really owns or controls them. Failing to do this could result in legal issues or penalties.
What Businesses Should Do
If your business has a complicated ownership structure, it’s important to understand these new rules and make sure you’re reporting everything correctly.
By following these rules, businesses can help create a more transparent and accountable business environment in South Africa.
Luke Victor
BA(SA), ICB Financial Accountant
The Tax Shop Alberton
More about Luke Victor
Luke obtained a Diploma as a Financial Accountant with ICB and is a registered member of SAIBA with experience in bookkeeping, debtors, creditors, VAT, payroll, PAYE, UIF, financials, taxation, Workman’s Comp and company secretarial.
Luke has been managing and running The Tax Shop Alberton for 3 years. With his help, we have reached our yearly targets from our head office for the last 2 years. He also has experience working in IT and Software Testing and Training.
Xero & QuickBooks Certified