What is Beneficial Ownership (BO)? Not completely sure what it means? Well, you’re not alone.
Many have been enjoying the benefits of owning a business with no legal attachment to it. These individuals are beneficial owners.
Still not sure what we’re talking about? Consider the following:
Depending on the agreement of ownership, a beneficial owner, to a large extent, is like a silent partner. They’re not always involved in the day-to-day operations of the business.
However, they have some influence over it. In some instances, beneficial owners are extremely involved in running all aspects of the business. These individuals could also be more than one person.
Their names aren’t on the company’s registration documents, unlike silent partners, who usually are the registered owners too. Beneficial owners benefit from the profits and any other privileges the business may offer.
It’s safe to say that a beneficial owner has a few advantages. They reap financially while maintaining their privacy. They’re also free from the headaches of paperwork or potential lawsuits.
As appealing as this may seem, it holds a few drawbacks and the potential for deception.
This is where the new legislation comes in.
What does it mean to be BO compliant?
Now that you know what a beneficial owner is, let’s look at what it means to be compliant.
Compliance has become essential in the business world. It’s one way to ensure that all businesses and legal entities remain transparent and avoid any illicit financial activities.
Amendments to the Companies Act 71 of 2008 and the General Laws (Anti-money laundering and combating terrorism financing) Amendment Act 22 of 2022 have made some legislative changes that have led to BO compliance.
On 1 April 2023, the Companies and Intellectual Property Commission (CIPC), introduced the Beneficial Ownership (BO) Register. The aim of this register is to keep a record of all individuals who own or control a legal entity.
CPIC considers a beneficial owner as someone who has 5% or more beneficial interest in the entity or voting rights.
Important aspects to ensure compliance
Being compliant requires you to adhere to the following:
1. Registration
It is mandatory for companies to keep an accurate record of their beneficial owners. The information should include these owners’ full names, date of birth, nationality and contact details. In addition, a description of their control of ownership is also required.
These details are to be registered with the CIPC. Companies formed before 24 May 2023 need to submit the information with their annual returns. Companies formed after this date need to do so 10 days after any changes.
This record allows the relevant authorities to identify who enjoys the benefits of ownership. The following entities are required to comply:
- External companies
- Private companies
- Non-profit companies
- Non-exempt state-owned enterprises
- Close Corporations
- It excludes Trusts
An authorised individual, mandated in writing by the company, should register as a user with the CPIC to capture this information.
On completion of registration and relevant processing, the CPIC will issue a Beneficial Ownership Register Certificate.
2. Keep information updated
The beneficial owners’ information should be updated regularly as they change. These updates should occur within 10 days of any change.
Where there are no amendments within a year, confirmation of this should be submitted at each financial year’s end.
3. Non-compliance and its consequences
Submitting the details of BO is a legislative requirement. Non-adherence to this law can lead to severe penalties. It can also lead to investigations and possible legal action against the company and directors; as per Section 214 of the Companies Act.
The importance of being BO compliant
There are a few reasons you should ensure you remain BO compliant.
1. Prevent illicit financial activities
BO compliance promotes transparency, which helps combat unlawful activities such as:
- Money laundering
- Tax evasion
- Terrorist financing
It aids financial institutions and regulators in identifying any suspicious behaviour and to take action as needed.
2. Highlights accountability
BO highlights accountability within corporate governance. It gives the stakeholders the assurance that the company has their best interests at heart. This fosters trust among customers, investors, and the public.
3. Ethical conduct
Corporate social responsibility is highly valued by all. Being BO compliant displays a company’s ethical conduct. They’re willing to be transparent and not afraid to be held accountable for their actions. This behaviour helps the business align their practices with societal expectations.
Embracing BO Compliance
Understanding BO compliance is essential in navigating the complexities of the business world. The introduction to this new regulatory framework creates a pivotal move towards transparency and accountability.
How can GreatSoft help you embrace BO?
At GreatSoft, our aim is to help you remain BO compliant. With our solutions, you can effectively address all the complexities associated with this process. Take your next step towards embracing BO compliance, contact us today.
