South Africa is introducing new rules regarding the disclosure of beneficial ownership of assets as part of the measures to address its laws regarding anti-money laundering and the combatting of terrorism financing.
The rules applicable to trusts and companies are not identical and persons who act as trustees of trust/s and as directors of company/ies, must ensure that they are familiar with both sets of rules.
The rules regarding trust assets, which came into effect from 1 April 2023, are outlined below.
The measures were introduced in a new section (11A) in the Trust Property Control Act (TPCA) read with the Regulations issued in terms thereof (Regulations).
In terms of section 11A(1) of the TPCA, a trustee must:
- establish and record the beneficial ownership of the trust;
- keep a record of the prescribed information relating to the beneficial owners of the trust;
- lodge a register of the prescribed information on the beneficial owners of the trust with the Master's Office; and
- ensure that the prescribed information referred to in paragraphs (a) to (c) is kept up to date.’
The aim of the new rules is to provide some form of transparency regarding the ownership of trust assets before such assets, or the income of such assets, are vested in the beneficiaries.
It is important for trustees of all trusts (including family trusts, investment vehicles, share schemes and charitable trusts) to assess to what extent the record-keeping and reporting requirements would apply to them and to ensure that they comply with their obligations in this regard.
What is a ‘beneficial owner’?
There is no standard definition of beneficial ownership in South Africa. When considering the concept in the context of trusts, the definition in the TPCA will apply, which includes:
- a natural person who directly or indirectly ultimately owns the trust property;
- a natural person who exercises effective control of the administration of the trust;
- each founder of the trust;
- each trustee of the trust; and
- each beneficiary referred to by name in the founding documents of the trust.’
Paragraphs (c) to (e) above are subject to special rules where the founder, trustee or the beneficiary is a legal person or a partnership.
The concept of beneficial ownership for purpose of TPCA reporting would have to be interpreted based on the context and on the specific set of facts. For example, in the context of a share scheme, a beneficiary who is not specifically named and who does not have a vested right to trust assets but who receives income derived from trust assets, would arguably not qualify as a beneficial owner as defined, although each case would have to be assessed based on the specific facts.
Information and documentation to be retained by trustees
The trustees must keep detailed information of the beneficial owners of trust assets, including full name, date of birth, nationality, an official identity document number or passport number, citizenship, residential address, address for notices, other means of contact, tax number (if applicable), class or category of beneficial ownership, the date on which the person became a beneficial owner, and the date on which the person ceased to be a beneficial owner.
Where the beneficial owner is a minor, the same information must be provided for the legal guardian of the minor. The trustee must keep a certified or verified copy of the official identity document or passport of each identified beneficial owner of the trust.
Electronic register by the Master of the High Court
The Master must keep an electronic register of beneficial owners. Trustees must be able to submit the beneficial ownership information (see above) to such electronic register. The register must be electronic and provide for access to registered users; and access for trustees to lodge and update information, upload documents and sign off on the information. It appears that this register is already available on the website of the Master of the High Court.
The trustees are, in terms of section 11A (see above), obliged to lodge a register of the beneficial owner information with the Master’s Office, i.e. on the electronic register and to ensure that such information is kept up to date.
Access to the information regarding beneficial ownership
This is likely to be the biggest concern for trustees: Which persons or entities will have access to the information and is there a risk that third parties could also obtain access to the information?
In terms of the Regulations, access to such information is restricted to various government bodies such as the National Prosecuting Authority, the Independent Police Investigative Directorate, State Security Agency, the Intelligence Division of the National Defence Force, a Special Investigating Unit, the South African Revenue Service, the Financial Intelligence Centre and such other bodies as named in the Regulations.
Access could also be granted to a person who is entitled to receive such information in terms of other national legislation. Regulation 3E sets out the list of entities as well as the process to obtain access to such information.
These entities must request access in writing providing proof that they qualify and designate officials who will have access. The Master must then grant access to the designated officials. The Regulations do not provide for the Master to request feedback or input from the trustees in question, before providing such access.
Other requirements of the Regulations
The Regulations also provide for the Master to establish and maintain a public register of persons disqualified from serving as trustees, and for trustees to record the details of accountable institutions as contemplated in section 11(1)(e) of the TPA. These include any accountable institution listed in Schedule 1 to the Financial Intelligence Centre Act, used by the trustees to perform any of the trustees’ functions relating to trust property.
Read the original publication at Bowmans.