On the 29th of March, the AIDC submitted its comments on the Draft Companies Amendment Regulations. The Draft Regulations were published by the Department of Trade and Industry for comment, and follow-on from the General Laws Amendment Act in aiming to address the legislative and regulatory weaknesses that led to South Africa’s greylisting by the Financial Action Task Force (FATF).
The AIDC welcomes the introduction of Beneficial Ownership Transparency principles through the Draft Regulations. As we have argued in the past, the lack of transparency around company affairs is a major obstacle in fighting corporate corruption and illicit financial flows. Modern corporations tend to hide their true owners by making use of holding companies, trusts, and other complex arrangements. The principle of Beneficial Ownership Transparency demands that companies provide the details of the real living person at the end of the ownership chain; the one who ultimately benefits from and exercises control over company affairs.
However, the Draft Regulations seem to have been put together in a rushed manner. They introduce a number of uncertainties and potential loopholes regarding the disclosure of beneficial owners. The Department of Trade and Industry has also seemingly folded under pressure from the Johannesburg Stock Exchange, as the Draft Regulations create a special category for public companies, exempting them from beneficial ownership reporting requirements.
Finally, as with the General Laws Amendment Act, the Draft Regulations fail to make any substantial commitments regarding public access to beneficial ownership information. Given the repeated failure of state institutions to act on cases of both public and private sector corruption, it is absolutely vital that this information be available to the general public – as is the case in countries around the world. This information is also important for workers and trade unions, who may find company ownership information vital when engaging in wage bargaining or other negotiations. We are concerned that this continued passing of the buck might be due to conflict within the state around the principle of public access. Read our comments below.
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