National Assembly passes a revised version of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill (Omnibus Bill)

On 22 November 2022, the National Assembly passed a revised version of the Omnibus Bill, which proposes to amend five pieces of legislation, including the Companies Act, 2008.

The Omnibus Bill is a response to South Africa's potential greylisting by the Financial Action Task Force (FATF) and is a measure aimed at addressing technical deficiencies in South Africa's legal framework to combat money laundering, corruption and financial crimes, identified by the FATF in October 2021.

The Omnibus Bill was first tabled in Parliament on 29 August 2022. We reported on the Omnibus Bill in a previous e-alert.

Following receipt of public comments in October 2022 and fast-tracking of the Omnibus Bill, an amended version of the Omnibus Bill was published on 18 November 2022, with a deadline of 22 November 2022 for the submission of public comments. Webber Wentzel submitted comments on the Omnibus Bill by the deadline. That same day, the National Assembly passed the Omnibus Bill.

Proposed amendments to the Companies Act, 2008

The Omnibus Bill in its present form proposes to amend the Companies Act, 2008 (Companies Act) to introduce a mechanism through which the Companies and Intellectual Property Commission (CIPC) can maintain beneficial interest/beneficial ownership information of companies. To that end, it introduces two new definitions into the Companies Act, "affected company" and "beneficial owner":

• an "affected company" is defined to mean a regulated company as set out in section 117(1)(i) and a private company that is controlled by, or a subsidiary of, a regulated company as a result of any circumstances contemplated in section 2(2)(a) or 3(1)(a); and
• a "beneficial owner" is defined to mean an individual who, directly or indirectly, ultimately owns a company or exercises effective control of the company, including in the ways set out in the definition (such as holding beneficial interests in securities; exercising voting rights associated with securities; or exercising a right to appoint or remove members of the board of directors).

The express inclusion of the definition of "affected company" and the use of the concept in the revised version of the Omnibus Bill is a result of concerns raised by public companies regarding obligations placed, in the previous version of the Omnibus Bill, on all companies to record and disclose every beneficial owner. The revised version of the Bill now places different beneficial interest/beneficial ownership disclosure obligations on affected companies and companies that are not affected companies, discussed below.

The revised version of the Omnibus Bill no longer seeks to incorporate the Financial Intelligence Centre Act, 2001 (FICA) definition of "beneficial owner" in the Companies Act definition of "beneficial owner", which is a welcome revision. However, it is not entirely clear why the references to "control" in the revised definition were not expressly linked to the sections that regulate control in the Companies Act.

The proposed amendments require every affected company to establish and maintain, as required in terms of a proposed new provision, section 56(7)(aA), a register of the persons who hold beneficial interests equal to or in excess of 5% of the total number of securities of that class issued by the company, together with the extent of those beneficial interests (the so-called register of disclosure of beneficial interest) and to ensure that this register is updated within the prescribed period after the company has received a notice contemplated in section 122(1).

Amendments proposed to section 122(1) require a person to give an affected company notice if the person has acquired or disposed of a beneficial interest in securities of the affected company amounting to a whole multiple of 5% of the issued securities of that class. A proposed new section, section 122(3A), in turn, requires an affected company that has received such a notice to file a record of that notice with the CIPC.

It is proposed that every company that is not an affected company:

• record in its securities register prescribed information regarding the natural persons who are the beneficial owners of the company, in the prescribed form, and ensure that this information is updated within the prescribed period after any changes in beneficial ownership have occurred; and
• file a record with the CIPC, in the prescribed form and containing the prescribed information, regarding the individuals who are the beneficial owners of the company, and ensure that this information is updated by filing notices with the CIPC within the prescribed period after any changes in beneficial ownership have occurred.

Accordingly, an affected company will not disclose persons who hold beneficial interests in shares in its securities register but will only do so in the register of disclosure of beneficial interest and will only do so as regards interests equal to or in excess of the 5% threshold. Companies other than affected companies are not required to have a register of disclosure of beneficial interest but must disclose prescribed information regarding all natural persons who are the beneficial owners of the company.

A reminder that all companies must record in their securities registers the holders of beneficial interests in "debt instruments", as defined in section 43 of the Companies Act, which includes all securities other than shares.

The amendments require every company (whether an affected company or a company that is not an affected company) to file an annual return with the CIPC and to include in that return (in addition to a copy of its annual financial statements, if it is required to have such statements audited):

• for companies other than affected companies, a copy of the company's securities register as required in terms of section 50 (which must include the prescribed information regarding all of the natural persons who are the beneficial owners of the company); and
• for affected companies, a copy of the company's securities register as well as the company's register of the disclosure of beneficial interest, as discussed above.

Provision is made that the prescribed requirements referred to in the provisions discussed above must be prescribed after consultation with the Minister of Finance and the Financial Intelligence Centre, established by section 2 of FICA.

Apart from these proposed amendments relating to beneficial interests in securities and beneficial ownership of companies, the Omnibus Bill provides for additional grounds of disqualification to be a director, ie if a person:

• has been convicted, in South Africa or elsewhere, and imprisoned without the option of a fine, or fined more than the prescribed amount (currently, ZAR1 000), for an offence:
• involving money laundering, terrorist financing, or proliferation financing activities as those terms are defined in section 1(1) of FICA; or
• under the Protection of Constitutional Democracy Against Terrorist and Related Activities Act, 2004 or the Tax Administration Act, 2011; or

• is subject to a resolution adopted by the Security Council of the United Nations, providing for financial sanctions.

Proposed amendments to the Trust Property Control Act, 1988 and the Nonprofit Organisations Act, 1997

The Omnibus Bill also proposes to amend, among others, the Trust Property Control Act, 1988 (TPCA) and the Nonprofit Organisations Act, 1997 (NOA).

The amendments proposed to the TPCA include:

• a definition of "beneficial owner", which includes a natural person who directly or indirectly ultimately owns the relevant trust property; a natural person who exercises effective control of the administration of the trust; each founder of the trust; each trustee; and each beneficiary of the trust;
• a requirement to establish and maintain records of such beneficial owners and lodge a register of such information with the Master's Office; and
• a requirement to record prescribed details relating to accountable institutions (as defined in FICA) which provide services to a trust.

While the proposed definition of "beneficial owner" in the TPCA is still widely framed in the revised version of the Omnibus Bill, the revised version no longer seeks to incorporate FICA's definition of "beneficial owner" in the TPCA's definition of "beneficial owner", which is welcome.

In the case of the NOA, the Omnibus Bill, in its present form, requires a nonprofit organisation to register under the NOA if it:

• makes donations to individuals or organisations outside of South Africa's borders; or
• provides humanitarian, charitable, religious, educational or cultural services outside of South Africa's borders.

This represents a departure from the previous version of the Omnibus Bill, which required all nonprofit organisations operating within South Africa (other than organs of state) to register under the NOA and comply with the NOA. The Omnibus Bill in its present form provides that only nonprofit organisations that are registered or required to register under the NOA must comply with its requirements.

Other amendments proposed to the NOA by the Omnibus Bill permit the Directorate for Nonprofit Organisations to collaborate with, and delegate specified administrative functions to, other organs of state.

The Omnibus Bill introduces into each of the Acts provisions dealing with the disqualification of trustees and office-bearers of registered nonprofit organisations and the removal of such persons from office. It also provides for:

• new offences, in the case of the TPCA, for trustees who fail to comply with the newly introduced provisions relating to the establishment, maintenance and submission of prescribed information relating to beneficial owners of trusts and accountable institutions used by trustees, and for trustees who fail to make specified disclosures to accountable institutions; and
• new administrative sanctions, in the case of the NOA, for nonprofit organisations that fail to register if required to do so and/or for registered nonprofit organisations that fail to perform any duty imposed or comply with a requirement in terms of section 12 (requirements for registration) or section 18(1)(bA) (provision of prescribed information relating to the office-bearers, control structure, governance, management, administration and operations of registered nonprofit organisations).

Following its passing by the National Assembly, the Omnibus Bill has been transmitted to the National Council of Provinces for concurrence. We anticipate that, in a bid to prevent South Africa's greylisting by the FATF and its undesirable consequences, the Omnibus Bill will be signed by the President and become law this year.

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Read the original publication at Webber Wentzel.