New disclosure requirements for companies. Comply or risk being deregistered!

It is no secret that companies are used as vehicles to hide money laundering and terrorist financing activities. Internationally, this has necessitated increasing corporate disclosure requirements to apply to corporate entities. With the new Amendment Act, such disclosure requirements have now also found their way into our law to allow authorities to have a better view of who the beneficial owners are that own and control a company.

In this article we take a look at amendments to the Companies Act 71 of 2008 which introduces new disclosure requirements. These amendments have been introduced by the recently passed General Laws (Anti-Money Laundering and Combatting of Terrorism Financing) Amendment Act 22 of 2022 (“Amendment Act”) with the new disclosure requirements applying as of 1 April 2023.

It is no secret that companies are used as vehicles to hide money laundering and terrorist financing activities. Internationally, this has necessitated increasing corporate disclosure requirements to apply to corporate entities. With the new Amendment Act, such disclosure requirements have now also found their way into our law to allow authorities to have a better view of who the beneficial owners are that own and control a company.

With the introduction of a new definition of “beneficial owner” in the Companies Act, the Companies and Intellectual Property Commission (“CIPC”) must now obtain and keep beneficial ownership information updated and accurate.

Presently, companies are required to maintain a register of the persons holding a beneficial interest in the company in terms of section 50 of the Companies Act. In addition, section 33 of the Companies Act requires companies to file annual returns with the CIPC. The purpose of the filing of an annual return is to enable the CIPC to ensure that it has the latest information of the company and also serves to confirm that the company is still conducting business.

To date it has not been a requirement that the CIPC should receive the securities registers of companies lodging their annual returns. Section 56 of the Amendment Act, however, has amended section 33 of the Companies Act to provide for a comprehensive mechanism through which the CIPC can keep accurate and updated beneficial ownership information insofar as it pertains to the annual returns of a company. In accordance with the Amendment Act, a copy of the company’s securities register and a copy of the register of the disclosure of beneficial interest must now be submitted to the CIPC as part of a company’s annual return. Not only does the Amendment Act oblige companies to provide its securities register as part of the annual return, it also requires companies to keep its securities registers up to date.

Furthermore, the CIPC is obliged to make the annual returns of any company available to any prescribed person. The nature and scope of a “prescribed person” is not published yet, but if one looks at the list of entities prescribed in terms of draft regulations relating to the Trust Property Control Act which mirrors aspects of the changes to the Companies Act, it can be assumed, such will include at least the National Prosecuting Authority, intelligence services, the SIU, the Public Protector and SARS – all agencies tasked with combatting money laundering and terrorist financing activities as well as corruption and tax evasion.

As the newly introduced amendments pertaining to the annual returns of a company will come into effect on 1 April 2023, it is vital that company directors, shareholders and officers familiarize themselves with the proposed changes and the proposed regulations to the Companies Act to ensure their compliance and the introduction of the necessary administrative procedures to correctly maintain and submit the required information to the CIPC.

Be sure to keep an eye out for our follow up articles in which we explore in more detail the other areas affected by the Amendment Act as well as our online webinars on these new anti-money laundering amendments.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s)

March 22, 2023
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