Who is who
  • A new draft law will create a public register of the shareholders of companies, replacing an onerous system that has obscured who owns what.
  • It would also demand that companies figure out who really owns 5% or more of their shares, cutting through fronts and proxies to actual people.
  • The changes would help combat money laundering, as well as corruption, says the trade and industry department.
  • The Companies Amendment Bill is now open for public comment.
  • For more stories go to www.BusinessInsider.co.za.

If the Department of Trade, Industry and Competition (DTIC) gets its way, South Africa will soon create its first-ever database of the shareholders of all registered companies – with details of the actual individuals hidden behind fronts and proxies for larger shareholders.

The DTIC on Friday formally called for public comment on a new version of the Companies Amendment Bill, as part of long-running efforts to close loopholes and tighten regulations that apply to any company registered in South Africa, from the behemoths listed on the JSE down to the tiniest, single-shareholder companies.

The law will make it easier to do business in South Africa, the DTIC says, and will help combat excessive executive pay. But perhaps its most dramatic impact will be on the information it will make available in terms of ownership, in measures the department says are aimed at fighting money laundering and corruption.

In theory, the shareholder register for any company is current available to anyone who files the right form with it, known as a CoR 24 request. That requires tracking down the company secretary, filing the form and, all too often, facing questions on why you want to see who owns its shares, even though no reason is required in law, or has to be disclosed. That has to be done for every company, individually.

Now the DTIC is proposing requiring companies to file their shareholder registers every year with the Companies and Intellectual Property Commission (CIPC), where they could be perused by anyone, instantly, across the entire database.

It would also make the information "accessible at the CIPC on an anonymous basis (i.e., without disclosing the identity of the person to the company)", points out Webber Wentzel partner Madelein Burger, in an analysis of the proposed law.

There is one problem: the information will be delayed, says Burger.

"We caution that these publicly available registers may be outdated, as changes in shareholding (and beneficial shareholding) from the last date filed, will only be reflected once the next annual return is filed, with no obligation to file interim changes."

The shareholder register for many companies will list other companies, or proxies such as trusts, rather than individuals. But the Companies Amendment Bill will also try to lever out what it refers to as the "true owners" behind such fronts, and make companies responsible for figuring out who those true owners are.

According to the draft law, only a natural person can be the beneficial owner "who has the power to direct the registered holder of a share with regard to the share or who ultimately benefits from the shareholding". Companies will be required to trace those people behind what may be chains of companies owning other companies, every three months. They will then have to figure out – and disclose – which individuals own 5% or more of their shares.

"There are a multiplicity of reasons supporting legislative measures to determine the ultimate owners of beneficial interests in a company," says the DTIC. "Fraud and tax evasion can thrive when company ownership is opaque. Company ownership arrangements can be misused for illicit purposes and other crimes including money laundering (proceeds of corruption) and terrorism finance."

(Compiled by Phillip de Wet)

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