The introduction of Beneficial Ownership (BO) disclosure requirements by the Companies and Intellectual Property Commission (CIPC) has placed new compliance obligations on South African companies. However, not all entities are subject to the same level of scrutiny. The Companies Act, 2008, distinguishes between Affected Companies and Non-Affected Companies, and this classification determines the extent of Beneficial Ownership reporting required.
What is an Affected Company?
An Affected Company is defined under Section 118(1) of the Companies Act, 2008, and typically includes:
- Public Companies (Listed or Unlisted)
- State-Owned Companies
- Private Companies that meet specific criteria, including:
- More than 10% of issued securities being held by non-related persons
- The transferability of securities not being restricted by the company’s Memorandum of Incorporation (MOI)
Since Affected Companies have broader public ownership and greater potential for changes in control, they are subject to more stringent compliance and reporting obligations, particularly regarding transparency and shareholder disclosures.
What is a Non-Affected Company?
A Non-affected Company refers to any company that does not fall under the Affected Company definition. These are typically private companies that:
- Restrict share transfers in their MOI
- Have a smaller, more controlled shareholder base with no significant public trading of securities
Non-affected companies generally experience fewer compliance burdens, as they do not face the same takeover or transparency regulations as their Affected counterparts.
Differences Between Affected and Non-Affected Companies
| Criteria | Affected Company | Non-Affected Company |
| Company Type | Public, State-Owned, or Certain Private Companies | Most Private Companies |
| Shareholding Rules | Shares may be freely traded or held by non-related parties | Shares restricted in MOI |
| Compliance Burden | Higher – subject to takeover and transparency laws | Lower – fewer regulatory requirements |
| Disclosure Obligations | More extensive reporting to CIPC and stakeholders | Limited reporting requirements |
How This Affects Beneficial Ownership Submissions
The classification of a company as Affected or Non-Affected influences its Beneficial Ownership disclosure requirements as follows:
Beneficial Ownership Submissions for Affected Companies
- Must disclose detailed Beneficial Ownership information to the CIPC.
- Required to maintain accurate, updated records of beneficial owners.
- Subject to stricter reporting timelines and audits.
- Greater transparency is required due to public or broad investor interest.
Beneficial Ownership Submissions for Non-Affected Companies
- Still required to submit Beneficial Ownership details but with fewer regulatory obligations.
- May not be subject to the same level of oversight or periodic audits.
- Information is primarily used for internal compliance rather than public transparency.
Conclusion
Understanding whether your company is classified as an Affected or Non-Affected Company is crucial for ensuring compliance with South Africa’s Beneficial Ownership regulations. Affected Companies face stricter obligations due to their potential for public interest and control changes, while Non-Affected Companies have fewer disclosure requirements but must still comply with BO submissions. As CIPC tightens regulatory enforcement, ensuring your company meets its BO obligations is essential to avoid penalties and ensure compliance integrity.
For more insights on compliance and Beneficial Ownership requirements, explore Intersect’s solutions for streamlined regulatory reporting.
