Beneficial ownership
The Omnibus Bill introduces a new section, dealing with beneficial ownership, into the Trust Property Control Act, 1988 (TPCA).
This new section, section 11A, obliges a trustee to:
- 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 relating to the beneficial owners of the trust with the Master's Office; and
- ensure that the prescribed information is kept up to date.
The Master must also keep a register, in the prescribed* form, containing prescribed* information about the beneficial ownership of trusts.
A trustee must make the information contained in the trust's register of prescribed information, and the Master must make the information contained in the Master's register of prescribed information, available to any prescribed* person.
Section 11A should be read together with the new proposed definitions of "beneficial owner" in the Financial Intelligence Centre Act, 2001 (FICA) and the Companies Act, 2008 (Companies Act) as compliance with section 11A will be needed to place companies in a position to discharge their duties under the Companies Act. Ideally, a duty to make information relating to the beneficial owners of a trust available to companies in which trusts are invested should also have been placed on trustees.
Introduction of a new term: "beneficial owner"
The Omnibus Bill introduces a relevant new definition, that of "beneficial owner". This definition (i) incorporates the meaning ascribed to the term in FICA, as amended by the Omnibus Bill, and, (ii) for the purposes of the TPCA, in respect of a trust, includes, but is not limited to, a natural person who directly or indirectly ultimately owns the relevant trust property or exercises effective control of the administration of the trust.
(For purposes of FICA, "trust" means a trust defined in section 1 of the TPCA other than a trust established:
- by virtue of a testamentary disposition;
- by virtue of a court order;
- in respect of persons under curatorship; or
- by the trustees of a retirement fund in respect of benefits payable to the beneficiaries of that retirement fund,
and includes a similar arrangement established outside South Africa.)
The definition of "beneficial owner" in FICA, as amended by the Omnibus Bill, and incorporated into the TPCA, refers to a natural person who directly or indirectly:
- ultimately owns or exercises effective control of:
- a client of an accountable institution; or
- a legal person, partnership or trust that owns or exercises effective control of, as the case may be, a client of an accountable institution; or
- exercises control of a client of an accountable institution on whose behalf a transaction is being conducted; and
includes the natural persons contemplated in section 21B of FICA.
As regards trusts, section 21B(4)(c), (d) and (e) of FICA, as amended by the Omnibus Bill, provides that these natural persons are:
- each founder;
- if a founder of the trust is not a natural person, the beneficial owner of the legal person or partnership;
- each trustee;
- if a trustee is not a natural person, the beneficial owner of the legal person or partnership;
- each natural person who purports to be authorised to enter into a single transaction or establish a business relationship with the accountable institution on behalf of the trust, whether such a person is appointed as a trustee of the trust or not;
- each beneficiary of the trust;
- if a beneficiary is not a natural person, the beneficial owner of that legal person, partnership, or trust; and
- if beneficiaries are not referred to by name in the trust deed or other founding instrument, the particulars of how the beneficiaries of the trust are determined.
As noted above, for the purposes of the TPCA, a "beneficial owner" also includes, but is not limited to, a natural person who, directly or indirectly, ultimately owns the relevant trust property or exercises effective control of the administration of the trust.
The legislator should clarify what is meant by "effective control" and "control" in both parts of the definition since while control in the company law context is generally determined with reference to, for example, a majority of the voting rights associated with a company's securities, for purposes of FICA, ownership of 25% or more of the shares with voting rights in a legal person is understood to usually be sufficient to exercise control of it.
Accountable institutions
The Omnibus Bill obliges trustees to:
- disclose their position as trustee to any accountable institution with which the trustee engages in that capacity; and
- make it known to the accountable institution that the relevant transaction or business relationship relates to trust property.
In addition, the Omnibus Bill obliges a trustee to record the prescribed* details relating to accountable institutions which the trustee uses as agents to perform any of the trustee's functions relating to trust property, and from which the trustee obtains any services in respect of the trustee's functions relating to trust property. These obligations are subject to the provisions of the Financial Institutions (Investment of Funds) Act, 1984, section 40 of the Administration of Estates Act, 1965 and the provisions of the trust instrument of the trust.
For these purposes, the term "accountable institution" has been introduced into the TPCA and has the meaning defined in section 1 and Schedule 1 of FICA. In a separate process from that of the Omnibus Bill, the Minister of Finance has proposed amendments to Schedule 1 (to, among others, include further accountable institutions) by way of notice published in the
Government Gazette.
Disqualification and removal of trustees
The Omnibus Bill proposes to amend section 6 of the TPCA, which deals with the Master's authorisation of a person to act as a trustee.
The amended section:
- identifies categories of persons who are disqualified from being authorised to act as a trustee (broadly, the same categories of persons who are disqualified in terms of the Companies Act from being a director);
- deals with the expiry and extension of the period of a person's disqualification and exemptions from certain grounds of disqualification; and
- places an obligation on the Master to establish and maintain, in the prescribed* manner, a public register of persons who are disqualified from serving as a trustee, in terms of a court order pursuant to the TPCA or any other law.
The Omnibus Bill also proposes to amend section 20 of the TPCA to provide that a trustee may be removed from office by the Master if the trustee becomes disqualified to be authorised as a trustee or fails to comply with the TPCA.
New offences
The Omnibus Bill creates new offences relating to failures to comply with the obligations introduced by the Omnibus Bill. A trustee who fails to comply with such an obligation is liable, on conviction, to a fine not exceeding ZAR10 million, or to imprisonment for a period not exceeding five years, or to both such fine and imprisonment. The introduction of these new offences is likely to prove a strong disincentive to serve as a trustee.
* These prescribed requirements must be prescribed after consultation with the Minister of Finance and the Financial Intelligence Centre.
This summary is not intended to, and does not, constitute legal advice, and may not be relied upon. For further information or tailored advice, please contact
Madelein van der Walt or your usual Webber Wentzel contact.
You can also access the Omnibus Bill's proposed amendments to the other pieces of legislation
here.
