In today’s fast-evolving business landscape, regulatory compliance is more than a legal obligation—it’s a vital component of sustainable growth. For small and medium-sized enterprises (SMEs) in South Africa, the recent amendments to the Companies Act 71 of 2008 regarding beneficial ownership (BO) reporting are a crucial step toward greater corporate transparency. Here’s what your business needs to know to stay compliant and avoid penalties.
What Is Beneficial Ownership?
A beneficial owner is a natural person who ultimately owns or controls a company. This could be someone with at least 5% of the company’s securities or someone who has significant influence over decision-making processes, such as through voting rights or board appointments. Unlike shareholders who may be corporate entities or trusts, beneficial owners must always be individuals.
Why the Change?
In 2023, South Africa was placed on the Financial Action Task Force’s (FATF) grey list, highlighting areas needing improvement in combating money laundering and terrorism financing. To address this, amendments introduced via the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act No. 22 of 2022 require SMEs and other businesses to provide detailed and updated information about their beneficial owners.
Who Needs to Comply?
The requirement applies to:
- All companies (except public and state-owned entities).
- Close corporations.
- Affected companies, which include private entities that are controlled by or are subsidiaries of regulated companies.
Your Obligations
To remain compliant, SMEs must:
- Maintain Records:
- Keep an up-to-date Securities Register listing all shareholders.
- Create and maintain a Beneficial Interest Register for individuals holding 5% or more of the company’s securities.
- File BO Information with the CIPC:
- Submit this data when filing your annual returns with the Companies and Intellectual Property Commission (CIPC).
- Report any changes to the BO register within five days.
- Provide Documentation:
- Submit certified identification for beneficial owners, along with other supporting records.
Penalties for Non-Compliance
Failing to comply could have serious financial and operational consequences, including:
- Fines of up to ZAR 1 million or 10% of annual turnover.
- Delays in filing essential company documents, potentially affecting operations.
- In extreme cases, deregistration of the business.
Why This Matters for SMEs
These changes represent more than just a regulatory hurdle. Transparent BO information strengthens trust with stakeholders, facilitates smoother transactions, and ensures SMEs are viewed as responsible entities.
Final Thoughts
Compliance with beneficial ownership regulations may seem daunting, but it’s an essential step for SMEs to align with global standards, enhance transparency, and build trust with customers and partners. By taking proactive measures now, your business can avoid costly penalties and focus on growth in a competitive market.
Stay informed and act swiftly—your business depends on it!
Contact us
📞 Contact us here to help you navigate these regulations effectively. We specialize in helping South African SMEs thrive in compliance and beyond.