So much for my resolution to keep increased contact with all of you through this written medium on a consistent basis. I do think everyone is in the same boat however, in that 2023 has been a year of just trying to keep up with the challenges being thrown at us from every quarter.
It’s almost biblical that 30 minutes of News TV will cover pestilence, war and natural disasters before going on an ad break. I am almost ready to start building my Ark.
At MRM we are still going through major changes as we try and adapt the face and services of the practice to embody the changes of the world we live in and am hoping that this settles down in 2024 a bit. Whilst change is a given, the acceleration thereof is at a point never seen before in our world’s history. The adaptation to this change is therefore more necessary than ever before. Many people will say, tried and tested trumps innovation, however the problem we are seeing is that statement only stands true in a static environment. We unfortunately currently find ourselves in the antithesis of this.
We have entered the 21st century at last with the revamping of our website and an active social media presence on Facebook, Instagram and Linkedin. This is in an attempt to keep our clients updated on the goings on at the firm on a regular basis, or at least until I get off my arse to write an update newsletter. My self esteem is still resilient enough not to have to base my relevance on people clicking on like buttons, but if you do, that’s cool, as we will know you out there and all the money I am paying people to do this is vaguely justified.
Anyway, believe it or not, this is not a general newsletter; it actually has a purpose for once. I will be sending out a more detailed one before Christmas giving a 2023 synopsis along with what we at MRM have actually been up to for the year.
To put a dent in everyone’s post world cup euphoria, Jimmy has been nagging me to detail governments’ latest efforts to annoy us all and waste yet more of our time, and that comes in the form of amendments to The Companies Act no 71 of 2008 in relation to companies and incorporating requirements for trusts. This is covered under the general term ‘Beneficial Ownership’.
The details are unlikely to be up there with anything you would choose to read today over reruns of the final whistle, poking fun at Owen Farrell and Tim Curry or shouting ‘Go Bokke’ like a person with tourettes so I am going to try and make it as painless as possible.
Earlier this year the International Community slapped us with a grey listing. We placed this in the trophy case along with all the other awards such as the junk status award, recessionary economy award and spiraling inflationary award, to mention but a few.
The grey listing was in the converted category of “money laundering and terrorist financing”, and as there can be no possible link between our government as such acts, we tried to give it back. They said they only would take it back if we complied with International Ownership Transparency requirements, hence the recent amendments to the Companies Act under discussion here.
In true South African form the powers that be have rushed legislation without fully considering the ramifications thereof and have left us to try and solve the puzzle whilst missing 2 corner pieces. I have also tried to ignore it hoping it would go away but this finely thought out strategy of mine has appeared not to work.
In point form:
- As you are aware, we attend to your companies’ secretarial duties to ensure you are always compliant under the Companies Act.
- We keep your share register which always reflects the current status of the shareholdings of the various entities you have interests in.
- This was never available outside of our offices unless, under the Companies Act, someone pitched up at our door with 3 shillings and a bag of grapes, for a transcript.
- I seem to remember this happening once in my 30 odd years in practice, so let’s call it unlikely.
- Under the new rules of beneficial ownership, these ownerships need to be uploaded to CIPC through a new portal established for this sole purpose.
- It is more complex than it appears, especially when group structures come into play. They require group organograms, where trusts are involved, ultimate beneficiaries etc, etc.
- As SARS are obviously jumping on this bandwagon, they want the tax numbers of the beneficial owners and have already amended tax return forms for this purpose and will no doubt have some plans to make our lives miserable in the future with this information.
- The changes became effective from 01 October 2023, making the requirement a necessity for companies on their anniversary date (a concession only given last week), this date is the same as the filing of your Annual Returns. That said companies with dates between the arbitrary date of 24 May 2023 and current become immediate. Go figure.
- For new companies formed this needs to be done within 30 dates of incorporation and any share change amendments need to be filed within 10 days of the relevant share transfer.
I was hoping, in the good South African way, that the fine for non compliance would be a slap on the wrist and maybe a few hundred bucks fine but shockingly the fine under Section 175 of the Companies Act is over R1 000 000 or 10% of turnover!!!!
Faced with this big stick we are all left with little choice, and every registered company has to comply. At MRM we are responding to this latest curveball as follows:
- We have created a mandate for companies and trusts to appoint a Money Laundering Reporting Officer (MRM) to file beneficial ownership forms and fulfill requirements in accordance with the Financial Intelligence Centre (FIC) Act on your behalf.
- This mandate will be forwarded to yourselves to sign and approve the current shareholding per our
records. - We have employed temp staff in addition to our own staff to start the herculean task of uploading the information needed to ensure compliance in accordance with the Act.
- Our internal deadline to have everyone compliant is 31 January 2024.
- Whilst at face value, this may seem simple, our test runs have proven it to be an intricate process,
especially when dealing with group structures, trust ownership and let’s not even mention nominee
shareholders. - I personally hate charging clients for tasks I don’t deem productive to you but we obviously have no
choice in this regard. - Our market research with our competitors shows an average charge of R3 000 to R3 500 per submission. By investing in some new software and doing it intelligently we can cover our costs at R1 500 per submission. In some of the more complex ones this may need to be amended but if this is necessary we will discuss it with you in advance.
- There is an annual update which needs to be filed along with the Annual Duty return, we will account for this by marginally increasing the Annual Duty submission charge. As we haven’t increased this filing charge for some years it shouldn’t cause any material hardship.
- Lastly, our cost to you for share transfers will increase slightly due to the increased work of filing these share changes with CIPC.
Please be on the lookout for the mandate forms which will start filtering through in the next few weeks. If you ignore us, one of our naggers will be on the phone. If you have any queries whatsoever please feel free to contact your partner in charge or any of the firm’s management as everyone at that level has been educated on these changes.
If your company is in deregistration with us, you will not be charged. We have lodged the long outstandings with the Tax Ombudsman, and are finally hoping for some traction here. We wait in silent anticipation.
Before finishing off, it’s becoming apparent that the cost of holding companies is becoming increasingly dear, especially if they are dormant or non trading. From a mistaken blanket SMS from SARS last week, which they had to retract, it has become apparent that they are starting to target non compliant companies, and the link in with beneficial ownership is making it easier for them to try and get blood from defunct entities.
We are compiling a list from our side of our nil return clients to encourage you to deregister. Feel free to chat to us if you believe your structures need some streamlining as these days the costs associated with maintaining all these entities is becoming restrictive.
Anyhoo, I better go do some meaningful work, I can’t sit around chatting all day, as pleasant as it’s been.
As I said earlier I will send out something in a month or so a bit livelier and hopefully a bit more entertaining.
Have an awesome week further,
Chris
