CIPC completely messed up on Beneficial Ownership Returns
It’s quite shocking. The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act was promulgated in December 2022.
It required that all companies submit a Beneficial Ownership Return to CIPC.
We have over 100 shelf companies and, like a good Boy Scout, I personally submitted the returns for all of them. In each case I received an email from CIPC confirming the submission.
On July 1 2024, they introduced a mechanism that stops you submitting your Annual CIPC Return unless you’ve submitted your Beneficial Ownership Return and guess what? Every one of our shelf companies is being blocked, because they can’t see into their own database!
I suspect that this will happen every year despite the fact that the BO return is a once-only unless there’s a change of shareholders.
And then. Who are the beneficial owners of a Non Profit Company? The Act says the shareholders of companies. But an NPC cannot declare dividends, so its shareholders cannot benefit. Therefore they cannot be beneficial owners. Oh well, we’ll enter the shareholders just to be able to submit the Annual CIPC return.
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The concept of “beneficial ownership” has been greatly abused both in the case of a non-profit, as you’ve noted, but also in the case of a trust. As you know, the concept of a trust is to separate ownership/ control from the receipt of benefits. For a trust, the concept of “beneficial ownership” is a contradiction in terms.
It would be great if someone were to challenge the requirements in court.
Hi Dave,
I agree totally. As the independent professional trustee of numerous trusts, I can’t reconcile being described as a beneficial owner of any of them.
Intrigued by your comment re NPCs. Firstly, “beneficial ownership” is a very poor description of what that beast actually is because in order to be a BO it is not necessary to be able to benefit or be an owner. E.g. director of company, trustee of trust. So shareholders who can never benefit would still be BOs.
But what really intrigues me is that you see to think NPC’s have shareholders at all. Check again. They can have members, but this is not the same. In my experience, NPCs generally don’t have members. I’m actually trying to work out what the CIPC wants in respect of BO for NPCs without members as they threw mine out because they wanted a “securities register” and the NPC has not issued securities (nor will it ever).
I do agree that the CIPC has completed messed this up. Don’t get me started that they expect the resolution forming the mandate to submit BO data to effectively be on a company letterhead.
Hi Carl,
And have you seen that CIPC want a BO return annually? Totally contrary to the amendment act.
Our private school is an NPC, but my staff did the registration and I didn’t notice a distinction between shareholders and Members. You’re probably right, but I really don’t give a …. about such things as shareholder or Member, you can’t receive dividends, so it makes no difference.
Also, as the independent professional trustee of hundreds of trusts, I find it difficult to describe myself as a beneficial owner. But lets face it, that amendment act was thrown together at the last minute of 2022 and didn’t achieve its objective. But we’re stuck with it.