CIPC Releases Enhanced Securities Register and Beneficial Interest Register.

Back on April 1, 2023, CIPC introduced the Beneficial Ownership Register. Initially, it only allowed the submission of beneficial ownership information. If you had no beneficial ownership to declare, you could not file your securities/members registers or beneficial interest registers. 

But guess what? CIPC has been hard at work, and now they have released enhancements to the Beneficial Owner Register functionality. It has introduced an integrated upload capability for the securities/members register and beneficial interest register (where applicable), which applies to everyone. Yes, that’s right, whether you are an affected company or a non-affected one, this upgrade is for you.

Understanding Beneficial Ownership Implementation

The Beneficial Ownership Register serves a crucial purpose in business and finance. Its main objectives are to:

• Create a register or repository of natural persons who have ownership or control over legal entities. 
• Assist law enforcement in their investigations, helping them determine the ultimate owners of an entity. 
• Mitigate risks highlighted in the national risk assessment, particularly when legal entities are identified as potential vehicles for money laundering and terror financing activities.

With the implementation of the BO register, customers will need to report information about the beneficial owners of their companies to the CIPC. A beneficial owner is any natural person who holds a substantial interest of 5% or more in a legal entity or exercises effective control of an entity. With the new update, entities that do not have beneficial owners can file their securities/members’ information. 

The Need for Beneficial Owner Register 

As per the Company Records Act, the CIPC maintains records of legal owners and management for entities, including members for close corporations and directors for companies. However, CIPC does not have a record of company shareholders and beneficial owners. The following challenges are the reasons for developing a BO register:

1. Obtaining (BO) information on companies, trusts, and partnerships is a serious international challenge.
2. Even when available, Law Enforcement Agencies face significant delays in obtaining BO information.
3. While South Africa has taken measures to promote transparency in BO, vulnerabilities that enable the abuse of legal persons and trusts for money laundering and terror financing are only partially addressed.
4. Competent authorities recognise the exposure of legal persons and trusts to money laundering and terror financing but have not thoroughly identified and assessed specific vulnerabilities leading to such exposure.
5. Companies are frequently misused for money laundering and become enablers of corruption during the awarding of government tenders and the subsequent laundering of illicit proceeds.
6. Company Service Providers (CSPs) selling and transferring shell companies to new owners operate without being subject to anti-money laundering and counter-terror financing measures.
7. Authorities cannot demonstrate that they applied effective, proportionate, and dissuasive sanctions in case of non-compliance with information requirements.

Key Takeaways

This new update from CIPC has introduced an enhanced functionality that allows entities with no beneficial ownership to declare to file their securities register and beneficial interest register seamlessly. This user-friendly feature ensures greater inclusivity and compliance for affected and non-affected companies. 

Now, businesses can maintain crucial ownership information with an efficient process. Furthermore, it helps safeguard South Africa’s regulatory environment and reduce risks associated with money laundering and terror finance activities. 

To stay abreast with CIPC updates regarding the beneficial ownership register, subscribe to the DataTracks blog.