The Companies and Intellectual Property Commission (CIPC) in South Africa recently made big changes to how companies and closed corporations file their Annual Returns. These changes are meant to make businesses more open and follow the rules. Beneficial Ownership (BO) file and Turnover Validation will be available starting December 11, 2023. This is a big change in how regulations work and will hopefully change the way businesses work. In this blog post, I’ll go into more detail about these changes and talk about what they mean for compliance, openness, and South Africa’s economy as a whole.
Filing for Beneficial Ownership
Beneficial Ownership filing is one of the most important changes that the CIPC brought about. Companies and close businesses are required to send in BO information before they can file their Annual Returns. This information needs to be sent within 10 working days of registration, and then it needs to be sent every year along with the Annual Return. CIPC has made resources like a User Guide and Webinars available to help people learn and follow the rules.
Validation of Turnover
At the same time, CIPC has added Turnover Validation to the Annual Return method. This check makes sure that the Beneficial Ownership form is correct. If they don’t, customers get a message warning them and a link that takes them to the beneficial ownership record. After the BO information is sent in, the process of filing the Annual Return and Annual Financial Statements/Financial Accountability Supplements (AFS/FAS) can begin.
Timeline for Compliance
Customers can temporarily skip the BO filing process with the current interface. However, beginning April 1, 2024, Annual Returns will not be able to be filed without first submitting BO declarations. This is in line with what the law says and is meant to get businesses to follow it.
What the Beneficial Ownership Register Is for
Creating the Beneficial Ownership register is meant to provide a list of individuals who own or have control over legal entities; to help law enforcement in their investigations into who the real owners of an entity are; and to lower the risks found in the national risk assessment, which said that legal entities could be used for illegal activities like money laundering and funding for terrorism.
Pros of having a beneficiary as an owner
Figuring out who owns or runs businesses makes the economy more appealing to investors and helps keep capital costs low. It also makes it easier for law enforcement to find people who break the law by making information about real or beneficial owners available quickly.
Encouragement from the CIPC Commissioner
CIPC Commissioner, Adv. Rory Voller, emphasizes that the implementation of BO filing should be viewed not as a punitive measure but as a collective effort to combat financial crime. Preventing corruption is essential for economic growth, job creation, and ensuring wider access to social services.
Important Information and Compliance
The new interface is initially incorporated into e-Services and will later be extended to other platforms. Companies and close corporations are urged not to wait until the last minute to file Annual Returns and to commence the process well in advance. Technical questions regarding Beneficial Ownership can be addressed through the CIPC enquiry system.
Consequences of Non-Compliance
Legal requirements say that all organizations, including closed corporations, non-profits, and private, and public companies, must send their Annual Returns to CIPC within a certain amount of time every year. At the same time, beneficial ownership statement filings must be done within 30 days of the date of incorporation. If this information is not given, CIPC will use its regulatory powers under the Companies Act to fix cases of noncompliance. It will do this through official processes and, if necessary, by going to court.
If a company or close corporation doesn’t file its annual returns, it is assumed that it is not doing any business at this time or in the future. If you don’t file your Annual Returns, you will be deregistered, which has very serious legal consequences. When someone is deregistered, their legal identity is taken away, their assets are given to the government, and their debts are no longer enforceable.
After the due date, entities have 30 business days to file their Annual Returns or become non-compliant. During this time, the company goes from being “In business” to being “Deregistration process.” If the submission doesn’t happen within the grace period, the state changes to “Final Deregistration,” which has legal effects.
Deregistration has a lot of effects, one of which is the loss of legal identity, which means that the company or close corporation no longer exists. The deregistered entity’s assets are given to the State, which could change deals that were already made. For example, if the company owns immovable property like buildings and land, it can’t sell or give this property to someone else.
Debts that a company owes are not forgiven when it deregisters, but they are no longer actionable. If a deregistered company owns real estate, it can’t sell or give those assets to someone else. Also, contracts made by someone saying they work for a deregistered company but where both sides think the company is still alive are not valid and the person involved is not responsible for anything.
The recent modifications introduced by CIPC underscore the corporate sector’s heightened emphasis on transparency, compliance, and accountability. In South Africa, the implementation of Beneficial Ownership filing, and Turnover Validation not only strengthens regulatory adherence but also contributes to cultivating an investor-friendly and secure business environment. Enterprises are strongly encouraged to embrace these changes proactively as they play a pivotal role in promoting both economic growth and integrity within the country.
In response to CIPC’s recent initiatives surrounding Beneficial Ownership filing and Turnover Validation, businesses are actively seeking effective solutions to seamlessly navigate these compliance requirements. Among the valuable tools available, software solutions like IRIS CARBON® emerge as essential allies for enterprises aiming to streamline their processes related to regulatory adherence.