The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 (Amendment Act) came into force on 31 December 2022.
The Amendment Act amends, amongst others, the Companies Act, 2008 (Companies Act) to achieve its objectives and complete the legislative landscape relating to transparency of the beneficial owners of entities. The intention is to aid in preventing corruption and criminal syndicates.
The key amendments to the Companies Act are:
The Amendment Act introduces two new concepts: an affected company and a beneficial owner.
An affected company is:
A beneficial owner, in respect of a company, means "an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company, including through –
Also of relevance is the already existing concept of beneficial interest. A beneficial interest in a security means the right or entitlement of a person (through ownership, agreement, relationship of otherwise, along or together with another person to: (a) receive or participate in any distribution in respect of the company's securities; (b) exercise or cause to be exercised, in the ordinary course, any or all of the rights attaching to the company's securities; or (c) dispose or direct the disposition of the company's securities, or any part of a distribution in respect of the securities.
The Amendment Act expands on the existing duties in section 56 of the Companies Act which will now not only govern beneficial interests in securities but also beneficial ownership of companies. From 1 April 2023 all companies that are not affected companies must file records with the CIPC containing information regarding their beneficial owners, and must keep such information up to date.
Such companies must now also record and maintain in their securities register information regarding the beneficial owners of the company. This information must also be filed with the CIPC.
As any person is entitled to inspect a company's securities register in terms of section 26 of the Companies Act, the information regarding beneficial owners will be accessible by the public.
In terms of section 56 of the Companies Act, registered shareholders of public companies must disclose to the public company in question the identity of all persons with a beneficial interest in the securities registered in the name of such registered shareholder.
From 1 April 2023, all affected companies (regulated companies as well as their subsidiaries) must establish and maintain a register of: (a) the abovementioned disclosures of beneficial interests; and (b) persons who hold beneficial interests of 5% or more of the securities of a particular class in such company, together with the extent of such beneficial interests.
The disclosure obligations in section 122 of the Companies Act (relating to acquisitions and disposals of beneficial interests in securities amounting to whole multiples of 5% of the issued securities of a particular class) will now apply to affected companies and not just to regulated companies as was the case up to now. The CIPC will further be obliged to maintain a register of the notices received from companies pursuant to section 122.
From 1 April 2023 companies will have to include the following documents when filing their annual returns:
The CIPC must make such annual returns available electronically to any person. Based on the Draft Companies Amendment Regulations 2023 published for public comment on 10 March 2023 (Draft Regulations), access to the documents filed with annual returns (i.e. the securities register and register of disclosure of beneficial interests) will be more limited. The Draft Regulations provides that access will be provided to such persons and on such conditions as may be determined by the CIPC after consultation with the Minister and the Financial Intelligence Centre.
The portion of the Amendment Act that came into effect on 31 December 2022 broadened the section 69 director disqualification relating to convicted individuals. It now includes persons that have been convicted, in South Africa or elsewhere, of an offence relating to money laundering, terrorist financing, or proliferation financing activities as those terms are defined in the Financial Intelligence Centre Act, 2001, or an offence in terms of the Protection of Constitutional Democracy Against Terrorist and Related Activities Act, 2004 or the Tax Administration Act, 2011.
Section 69 now also specifically disqualifies a person that is subject to a resolution adopted by the Security Council of the United Nations, providing for financial sanctions which entail the identification of persons or entities against whom member states of the United Nations must take the actions specified in the resolution. Such a disqualification ends when the Security Council of the United Nations takes a decision to no longer apply that resolution to a person contemplated in that subsection.
The Draft Regulations have been published for public comment and are accordingly not yet final. As it stands the Draft Regulations generally provide that companies will have to update their records relating to shareholding, beneficial interests and beneficial owners within five business days of any change.
Please contact Nada van Dyk or Rakhee Singh should you require further information or have any other South African company law queries.