In an attempt to head off greylisting, Parliament recently amended the Trust Property Control Act, the act that inter alia governs trusts, including the typical family trusts that have been established for the benefit of many individuals and their families.
A significant change to the Act relates to knowing who the true beneficial owners are of the trust assets.
The aspect of beneficial ownership and the need for transparency is a key element that is to be found internationally in regulatory aspects of this type (in fact similar requirements have now been inserted into the Companies Act, 2008 to apply to certain companies).
The expression “beneficial ownership” is well-known in the commercial world to describe typically the situation where one party is reflected as the holder or owner of an asset – usually shares or other securities – but where that person holds only as a nominee, while another person is the beneficial owner.
The definition of “beneficial ownership” introduced into the Act, however, goes much further than this common law meaning.
Who are “beneficial owners”?
In relation to a trust it now means the following:
- a natural person who directly or indirectly ultimately owns the relevant trust property (this would include a nominee-principal relationship as described above, as well as beneficiaries of a so-called “bewind” trust);
- a natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to the trust deed;
- each founder of the trust (or if the founder is a legal person or someone acting on behalf of a partnership or in terms of another trust, the natural person who directly or indirectly ultimately owns or exercises effective control over that legal person, partnership or trust);
- each trustee of the trust (or if the trustee is a legal person or person acting on behalf of a partnership, the natural person who directly or indirectly ultimately owns or exercises effective control of the legal person or partnership);
- each beneficiary named in the trust deed (or if the beneficiary is a legal person, a partnership or person acting on behalf of a partnership or pursuant to another trust, the natural person who directly or indirectly ultimately owns or exercises effective control of that legal person, partnership or trust).
What must trustees do?
A new section 11A of the Act has been introduced that requires the following:
- The trustees must establish and record the beneficial ownership of the trust, keep a record of the prescribed information relating to beneficial owners of the trust, lodge a register of the prescribed information on the beneficial owners with the Master, and ensure that the prescribed information is kept up to date.
- The Master must keep a register in the prescribed form containing the prescribed information about the beneficial ownership.
- A trustee must make the information contained in the register available to any person as prescribed, as must the Master.
- All these prescribed requirements will be set out in regulations, and draft regulations published include, for each beneficial owner, full names, date of birth, nationality, official ID number, residential address, address for service of notices (if different), other means of contact, the reasons why the person is a beneficial owner, the date upon which he or she became a beneficial owner and, where applicable, the date upon which he or she ceased to be a beneficial owner.
- In addition, the trustee must keep a certified copy of the official identification document of each beneficial owner that must correspond to the details above.
The Master’s register must be electronic and it must provide for access to registered users through a username and password, as well as other security measures, the ability of a trustee to lodge the information of each beneficial owner, to update the information and to upload documents, and other requirements.
In addition, the information contained in the register must be available to various government institutions involved in the intelligence and policing area, including the public protector, SARS, the NPA, the SIU, etc.
Conclusion
It is evident that some significant obligations are now imposed on trustees (ie on trusts) to comply with these provisions and keep adequate records, specifically – though by no means exclusively – in relation to beneficial ownership, and to ensure that the information is updated accordingly. If you are a trustee and not sure how these (and other changes to the Act) may affect you and a trust you are associated with, get in touch and we will point you in the right direction.
Thanks to Werksmans Attorneys for bringing this to our attention via this article.