New business ownership rules planned for South Africa

President Cyril Ramaphosa’s cabinet has approved the Companies Amendment Bill of 2021 for public comment, with the draft bill set to introduce several new regulations for businesses in South Africa.

One of the key focuses of the bill is promoting transparency around exactly ‘who owns what’ at South African businesses, said Trade, Industry and Competition minister Ebrahim Patel.

“Uncovering true or beneficial ownership is a critical measure in global efforts to confront and address money laundering, corruption and the financing of terrorism,” he said.

“The Companies Amendment Bill proposes new provisions on beneficial ownership, placing an obligation on companies to know and disclose the identity of their true shareholders who hold a beneficial interest amounting to 5% or more of the total shares in a company.”

Patel said that the proposed laws also aim to make it easier to do business in South Africa.

Since the implementation of the Companies Act, several deficiencies have manifested, which has caused unnecessary costs of compliance and retards the efficient and effective conduct of business, he said.

“The bill aims to eliminate, as far as possible, these deficiencies,” Professor Michael Katz, chairman of the Specialist Committee on Company Law (SCCL).

“In addition, certain unintended consequences of the existing legislation have also adversely impacted on the conduct of business and, so again, the bill aims to remedy these problems.  All of these remedial measures take into account best practice which has arisen during the intervening period since the drafting of the existing Act,” he said.

Patel said that the amendments contained in the bill also set out to improve accountability and scrutiny on remuneration practices, promote shareholder activism and corporate governance.

“Furthermore, they also relieve companies of onerous, impractical and burdensome provisions in previous iterations of companies legislation. “Lastly, they give South Africa instruments to undertake its role in the global offensive against illicit cross-border behaviour,” he said.

Read: New law to force South African companies to report pay differences between executives and workers.

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New business ownership rules planned for South Africa