How to Master Beneficial Ownership: A Complete Guide for South African Businesses

Key Takeaways

• Beneficial ownership is the concept of identifying the natural persons who ultimately own or control a legal entity, such as a company, a trust, or a partnership.
• Beneficial ownership disclosure is important for transparency and accountability, as it can help prevent and combat money laundering, tax evasion, corruption, and other financial crimes.
• Entities and individuals in South Africa are required to file and update their beneficial ownership information with the Companies and Intellectual Property Commission (CIPC) online, according to the new regulations that came into effect in April 2023.
• Beneficial ownership information can be accessed and used by various stakeholders, such as government, business, civil society, and law enforcement, for due diligence, compliance, investigation, and analysis purposes.
• Beneficial ownership transparency can be improved by enhancing the quality and availability of the data, and by involving and collaborating with different stakeholders, both locally and internationally.

Introduction

Beneficial ownership is a term that you may have heard of, but do you know what it means and why it matters? In this guide, we will explain the concept and importance of beneficial ownership, and how you can comply with the new regulations in South Africa. We will also show you how to access and use beneficial ownership information, and how to improve beneficial ownership transparency. Whether you are a business owner, a professional, a researcher, or a citizen, this guide will help you understand and appreciate the benefits and challenges of beneficial ownership disclosure.

What is Beneficial Ownership?

Beneficial ownership is the concept of identifying the natural persons who ultimately own or control a legal entity, such as a company, a trust, or a partnership. A beneficial owner is not necessarily the same as the legal owner, who may be another entity or a nominee. For example, a company may be owned by another company, which in turn may be owned by a trust, which may have a founder, a trustee, and a beneficiary. The beneficial owner is the person who ultimately benefits from the ownership or control of the entity, or who has the power to influence its decisions.

The criteria and thresholds for identifying beneficial owners may vary depending on the type and structure of the entity, and the purpose and context of the disclosure. However, some common factors that may indicate beneficial ownership are:

• Ownership interest: The percentage of shares, capital, or profits that a person owns or is entitled to in an entity.
• Voting rights: The percentage of voting rights or influence that a person has in an entity.
• Control: The ability or authority that a person has to appoint or remove directors, managers, or trustees, or to make decisions on behalf of an entity.
• Other means: Any other means or arrangements that a person has to exercise control or influence over an entity, such as contracts, agreements, resolutions, mandates, or powers of attorney.

The table below shows some examples of beneficial owners in different types of entities, based on the CIPC guidelines.

Why is Beneficial Ownership Important?

Beneficial ownership disclosure is important for transparency and accountability, as it can help prevent and combat money laundering, tax evasion, corruption, and other financial crimes. By revealing the true owners and controllers of entities, beneficial ownership information can enable various stakeholders, such as government, business, civil society, and law enforcement, to:

• Conduct due diligence: Beneficial ownership information can help verify the identity and background of potential or existing customers, suppliers, partners, or investors, and assess the risks and opportunities of doing business with them.
• Ensure compliance: Beneficial ownership information can help comply with the legal and regulatory obligations and standards, such as the Financial Intelligence Centre Act (FICA), the Financial Action Task Force (FATF) recommendations, and the Extractive Industries Transparency Initiative (EITI) requirements.
• Investigate and prosecute: Beneficial ownership information can help trace and recover the proceeds of crime, and hold the perpetrators accountable, by exposing the complex and opaque structures and networks that they use to hide their identity and assets.
• Analyse and monitor: Beneficial ownership information can help analyse and monitor the trends and patterns of ownership and control of entities, and identify the risks and vulnerabilities of the financial system, the economy, and the society.

Beneficial ownership disclosure can also bring benefits to the entities and individuals who file and update their information, such as:

• Enhance reputation: Beneficial ownership disclosure can help demonstrate integrity and credibility, and build trust and confidence with the stakeholders and the public.
• Reduce costs: Beneficial ownership disclosure can help reduce the administrative and operational costs of filing and updating multiple and inconsistent information with different authorities and agencies.
• Access opportunities: Beneficial ownership disclosure can help access new markets and opportunities, and attract more customers and investors, by complying with the international standards and expectations.

The following video explains the concept and importance of beneficial ownership, and how Dun & Bradstreet can help with data and analytics.

How to Comply with Beneficial Ownership Regulations?

Entities and individuals in South Africa are required to file and update their beneficial ownership information with the Companies and Intellectual Property Commission (CIPC) online, according to the new regulations that came into effect in April 2023. The CIPC is the custodian and regulator of the beneficial ownership register, which is a centralised and electronic database of the beneficial owners of all types of entities in the country.

The obligations and responsibilities of filing and updating beneficial ownership information vary depending on the type and status of the entity and the individual. However, some general steps and guidelines are:

• Register with the CIPC e-services portal, if not already registered. You will need a customer code, a password, and a security code to access the portal.
• Log in to the portal and select the option to file beneficial ownership information. You will need to provide the entity’s name, registration number, and type, and the individual’s name, identity number, and role.
• Declare and confirm the beneficial ownership information, using the online form or the spreadsheet template provided by the CIPC. You will need to provide the details of the beneficial owners, such as their names, identity numbers, addresses, contact details, ownership interests, voting rights, control, and other means.
• Upload and submit the supporting documents, such as the organogram or diagram of the entity’s structure, the resolution or agreement of the entity’s board or members, the power of attorney or mandate of the individual filing the information, and any other relevant documents.
• Receive and retain the confirmation of filing from the CIPC, which will include the date and time of filing, the reference number, and the summary of the information filed.

The table below shows some examples of the filing deadlines and frequencies for different types of entities, based on the CIPC guidelines.

The penalties and sanctions for non-compliance or false information may include:

• Administrative fines of up to R1 million or 10% of the entity’s annual turnover, whichever is higher
• Criminal prosecution and imprisonment of up to 10 years
• Suspension or cancellation of the entity’s registration or licence
• Disqualification or removal of the individual’s role or position

How to Access and Use Beneficial Ownership Information?

Beneficial ownership information can be accessed and used by various stakeholders, such as government, business, civil society, and law enforcement, for due diligence, compliance, investigation, and analysis purposes. The CIPC provides a public and online platform to access the beneficial ownership register, which contains the information filed by the entities and individuals.

To access the beneficial ownership register, you will need to:

• Register with the CIPC e-services portal, if not already registered. You will need a customer code, a password, and a security code to access the portal.
• Log in to the portal and select the option to search beneficial ownership information. You will need to provide the entity’s name, registration number, or type, or the individual’s name or identity number.
• View and download the beneficial ownership information, which will include the details of the beneficial owners, such as their names, identity numbers, addresses, contact details, ownership interests, voting rights, control, and other means.

To use the beneficial ownership information, you will need to:

• Verify and analyse the beneficial ownership information, using various tools and techniques, such as cross-checking with other sources, using visualisation tools, applying data analytics, etc.
• Compare and contrast the beneficial ownership information, using various criteria and indicators, such as ownership concentration, control distribution, risk exposure, etc.
• Identify and report any discrepancies, anomalies, or red flags, using various channels and mechanisms, such as feedback forms, complaints systems, whistle-blowing platforms, etc.

The following video provides a webinar on beneficial ownership transparency of legal persons, featuring a panel of experts with a global and domestic perspective.

How to Improve Beneficial Ownership Transparency?

Beneficial ownership transparency can be improved by enhancing the quality and availability of the data, and by involving and collaborating with different stakeholders, both locally and internationally. Some of the recommendations and suggestions on how to improve beneficial ownership transparency are:

• Adopt and implement data standards, such as the Beneficial Ownership Data Standard (BODS), which can help ensure the consistency, completeness, accuracy, and interoperability of the data.
• Establish and enforce verification mechanisms, such as the use of digital identity systems, biometric authentication, or third-party validation, which can help ensure the authenticity, reliability, and timeliness of the data.
• Solicit and incorporate public feedback, such as the use of online surveys, consultations, or reviews, which can help ensure the relevance, usefulness, and responsiveness of the data.
• Raise awareness and build capacity, such as the use of training, education, or advocacy, which can help ensure the understanding, appreciation, and utilisation of the data.
• Promote and support innovation, such as the use of technology, research, or development, which can help ensure the advancement, improvement, and optimisation of the data.
• Strengthen and expand cooperation, such as the use of networks, partnerships, or agreements, which can help ensure the alignment, harmonisation, and integration of the data.

Some of the examples or case studies of best practices or initiatives on beneficial ownership transparency, both locally and internationally, are:

• The Open Ownership project, which is a global initiative that aims to build an open and public beneficial ownership register, and to support the implementation and use of beneficial ownership data.
• The Extractive Industries Transparency Initiative (EITI), which is a global standard that requires the disclosure of beneficial ownership information for the oil, gas, and mining sectors, and to promote good governance and accountability in the extractive industries.
• The Financial Sector Conduct Authority (FSCA), which is a local regulator that requires the disclosure of beneficial ownership information for the financial services sector, and to promote the integrity and stability of the financial system.
• The South African Revenue Service (SARS), which is a local authority that uses the beneficial ownership information for tax administration and compliance purposes, and to prevent and combat tax evasion and avoidance.
• The Financial Intelligence Centre (FIC), which is a local agency that uses the beneficial ownership information for anti-money laundering and counter-terrorism financing purposes, and to prevent and combat financial crimes and illicit flows.

Frequently Asked Questions

Here are some common or frequently asked questions on beneficial ownership, along with concise and informative answers.

What is the difference between a beneficial owner and a legal owner?

A beneficial owner is a natural person who ultimately owns or controls a legal entity, such as a company, a trust, or a partnership. A legal owner is a person or an entity who is registered as the owner of the legal entity, but may not be the ultimate owner or controller.

Why do I need to file beneficial ownership information with the CIPC?

You need to file beneficial ownership information with the CIPC to comply with the new regulations that came into effect in April 2023, which aim to enhance transparency and accountability, and to prevent and combat money laundering, tax evasion, corruption, and other financial crimes.

How do I file beneficial ownership information with the CIPC?

You need to file beneficial ownership information with the CIPC online, using the e-services portal. You will need to provide the details of the beneficial owners, such as their names, identity numbers, addresses, contact details, ownership interests, voting rights, control, and other means. You will also need to upload and submit the supporting documents, such as the organogram, the resolution, the power of attorney, and any other relevant documents.

How often do I need to update beneficial ownership information with the CIPC?

You need to update beneficial ownership information with the CIPC whenever there is a change in the beneficial ownership or control of the entity, or at least once a year, depending on the type and status of the entity. You will need to follow the same steps and guidelines as filing the information for the first time.

How do I access beneficial ownership information from the CIPC?

You can access beneficial ownership information from the CIPC online, using the e-services portal. You will need to provide the entity’s name, registration number, or type, or the individual’s name or identity number. You will be able to view and download the beneficial ownership information, which will include the details of the beneficial owners, such as their names, identity numbers, addresses, contact details, ownership interests, voting rights, control, and other means.

How do I use beneficial ownership information from the CIPC?

You can use beneficial ownership information from the CIPC for various purposes, such as due diligence, compliance, investigation, and analysis. You will need to verify and analyse the beneficial ownership information, using various tools and techniques, such as cross-checking with other sources, using visualisation tools, applying data analytics, etc.

You will also need to compare and contrast the beneficial ownership information, using various criteria and indicators, such as ownership concentration, control distribution, risk exposure, etc. You will also need to identify and report any discrepancies, anomalies, or red flags, using various channels and mechanisms, such as feedback forms, complaints systems, whistle-blowing platforms, etc.

What are the benefits and challenges of beneficial ownership transparency?

Beneficial ownership transparency can bring benefits to various stakeholders, such as government, business, civil society, and law enforcement, by enhancing transparency and accountability, and by preventing and combating money laundering, tax evasion, corruption, and other financial crimes.

Beneficial ownership transparency can also bring benefits to the entities and individuals who file and update their information, such as enhancing reputation, reducing costs, and accessing opportunities. However, beneficial ownership transparency also faces challenges, such as data quality, privacy, security, standardisation, verification, feedback, awareness, capacity, innovation, and cooperation.

Conclusion

In this guide, we have explained the concept and importance of beneficial ownership, and how you can comply with the new regulations in South Africa. We have also shown you how to access and use beneficial ownership information, and how to improve beneficial ownership transparency.

• Beneficial ownership is a key element of transparency and accountability, and can help prevent and combat money laundering, tax evasion, corruption, and other financial crimes.
• By filing and updating your beneficial ownership information with the CIPC, you can demonstrate your integrity and credibility, and build trust and confidence with your stakeholders and the public.
• By accessing and using beneficial ownership information from the CIPC, you can conduct due diligence, ensure compliance, investigate and prosecute, and analyse and monitor the ownership and control of entities.
• By improving the quality and availability of beneficial ownership information, and by involving and collaborating with different stakeholders, you can enhance the benefits and overcome the challenges of beneficial ownership transparency.

We hope this guide has helped you understand and appreciate the benefits and challenges of beneficial ownership disclosure, and how you can comply with the regulations and use the information responsibly.