The who: Who is required to file registration of beneficial ownership?

Non-affected entities are required to disclose beneficial ownership in accordance with Regulation 32B of the Companies Regulations while affected companies, as defined in the Companies Act 71 of 2008 (Companies Act), are expected to enter the information of the persons who hold a 5% or greater beneficial interest in the securities of the company, in accordance with Regulation 32A of the Companies Regulations.

An affected company is a:

• public company;
• state-owned company; or
• private company that is a “regulated company” for takeover law purposes – namely where more than 10% of the shares in the company have been transferred amongst non-related persons within the preceding 24 months. Subsidiaries of regulated companies are also affected companies.

It is noteworthy to mention here that the draft Companies Amendment Bill, B 27B-2023, proposes that the test for a private company to being considered a “regulated company” (and therefore an “affected company”, for beneficial interest disclosure purposes) be overhauled. The new test will inquire into the number of “direct or indirect” shareholders (there would need to be at least 10 or more) and annual turnover or asset value considerations as may be prescribed in the regulations. Although it is unclear at this stage what the regulations will ultimately provide, it will be important for beneficial ownership filing purposes to identify whether a company is a non-affected or affected company, as the filing requirements differ.

For more information regarding who is required to file registration of beneficial ownership and how to complete such filings, you can read our Corporate & Commercial Alert published on 5 July 2023.

The when: What is the deadline for beneficial ownership filings?

Neither the Companies Act nor the Companies Regulations gives clear guidance as to when exactly beneficial ownership filings are required to be made by non-affected companies. This has been largely left to be dealt with by way of the CIPC’s guidance notes and customer notices. The most recent update from the CIPC (as of the date of publication of this Alert) by way of Customer Notice 5 of 2024 states that entities incorporated after 24 May 2023 have to file beneficial ownership information within 10 business days after the date of incorporation. Entities are required to update their beneficial ownership records within 10 business days of changes in beneficial ownership of the entity.

Entities that were incorporated prior to 24 May 2023 have had to file their beneficial ownership information with their annual returns and are now faced with a hard deadline of 24 May 2024. From 1 April 2024, the CIPC will introduce a “hard-stop functionality” which will have significant consequences for entities that do not comply with the 24 May 2024 deadline. The rationale for this is that by this time all companies should have reached their first anniversary since the commencement of the Companies Regulations.

The why: What are the consequences if beneficial ownership registrations are not filed?

If this deadline is not met, not only will entities be liable for administrative fines, as initially indicated by the CIPC, but they will also be unable to file their annual returns, the consequences of which can result in the deregistration and possible withdrawal of the entity by the CIPC. However, in terms of section 171(7) of the Companies Act, there first needs to be a compliance notice issued by the CIPC (after its investigation of a breach of the Companies Act), which if not complied with by the company can give rise to an administrative fine upon application by the CIPC to the court. As for blocking further annual return filings, questions may arise regarding the exact source of the CIPC’s statutory authority to impose this strong measure – and this might become an active area of administrative law litigation.

Conclusion

We advise clients to refer to the CIPC User Guidelines on Beneficial Ownership which detail the process of beneficial ownership filings. At CDH, we are able to assist with the determination of beneficial owners, advise on the filing requirements, and submit the filing on your behalf.