In recent years, there has been a global shift towards greater transparency and accountability in business ownership. As part of South Africa’s commitment to improving corporate governance and complying with international anti-money laundering (AML) to uplift the greylisting imposed on South Africa in 2023, companies are now required to submit a Beneficial Ownership Declaration as part of their Annual CIPC Returns.
If you're a business owner in South Africa, it’s crucial to understand what the Beneficial Ownership Declaration entails and why it’s essential for your company. Let’s dive in.
What is a Beneficial Ownership Declaration?
A Beneficial Ownership Declaration is a legal document that requires companies to disclose the individuals who ultimately own or control the company. These individuals are referred to as “beneficial owners,” and the declaration serves to identify them.
In simpler terms, it means that you need to provide information about the individuals (natural person) who benefit from the company’s income or assets, even if they don’t necessarily hold a direct shareholding. (Eg: through a Trust). This declaration ensures that authorities can trace ownership to the real people behind a business, which is particularly important for anti-corruption, anti-money laundering, and tax enforcement.
Why is the Beneficial Ownership Declaration Required?
Enhancing Transparency: The primary goal of this requirement is to create greater transparency in business ownership. In South Africa, companies have historically been able to obscure the true owners of a business by using nominee shareholders or holding companies. The Beneficial Ownership Declaration ensures that the true beneficiaries are known to regulatory authorities.
Compliance with International Standards: South Africa is a member of the Financial Action Task Force (FATF), an international body that sets global standards for combating money laundering and the financing of terrorism. By enforcing the disclosure of beneficial ownership, South Africa aligns itself with these global requirements, ensuring that the country remains compliant with international regulations.
Fighting Financial Crime: The declaration helps the government and financial institutions monitor the true individuals behind companies, reducing the risk of illegal activities such as tax evasion, money laundering, and terrorist financing.
Protection of Stakeholders: Having transparent ownership structures also protects creditors, investors, and other stakeholders, as it reduces the risk of fraud, misrepresentation, or hidden conflicts of interest.
What Does the Declaration Involve?
When you submit your Annual CIPC Returns, you will need to provide specific details about the beneficial owners of your company. These details include:
Full name of the individual(s) who hold the beneficial ownership interest in the company.
Identity number or passport number (for non-residents).
Nationality of the beneficial owner.
Nature and extent of their ownership or control, including the percentage of shares held or voting power.
Details of any intermediaries (such as trusts, foundations, or corporate vehicles) through which ownership or control is exercised.
In addition, it’s important to note that this information is not publicly available but will be accessible to relevant authorities for regulatory and investigative purposes.
Who Needs to Complete the Declaration?
The Beneficial Ownership Declaration applies to all South African companies, including private companies (Pty Ltd) and public companies (Ltd).
When Is the Beneficial Ownership Declaration Due?
The Beneficial Ownership Declaration must be submitted with your Annual CIPC Return. These returns are due within 30 business days of the anniversary date of when your company was formed.
What Happens If You Don’t Comply?
Failure to comply with the Beneficial Ownership Declaration requirement can lead to penalties, fines, and potential restrictions on your company’s registration status with CIPC preventing them from trading or operating legally.
How My Finance Partner Can Help
At My Finance Partner, we understand the complexity of South Africa’s corporate governance requirements, and we are here to help ensure your business stays compliant with all tax and regulatory obligations.
If you need assistance with the Beneficial Ownership Declaration, our expert team can guide you through the process.
Get in touch with us today to ensure your company is fully compliant with all regulations. Contact us at info@mfpartner.co.za
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