Paul Janisch

Beneficial Ownership registers for trusts

South Africa gets grey listed and Slaptjips decides to do something about it.  This is what he does.  It's a Google document link - you can download the register which is an Excel document created by one Graeme Buss who appears to work for SITA.

Once you've filled in this form it seems to be uploaded to a Google drive.  And then what.  Well according to BDO - in a fearmongering article

Failure to comply with these requirements may result in a penalty of up to R10 million and/or five years' imprisonment for trustees. Additional sanctions may be applied by the Master of the High Court or the Financial Intelligence Centre.

It is likely that trust changes lodged with the Master of the High Court may trigger an inspection of the Beneficial Ownership database, resulting in penalties being administered for non-compliance.

We urge you to take immediate action to ensure compliance with these new requirements to avoid any penalties. BDO can assist trustees to digitally submit all the required information under a Power of Attorney

The article assumes that the master can get it together to capture this information.  Ask anyone who wants to lodge a trust with the master about what you have to do.  It's simple, pay someone who will pay someone.  It's just as corrupt as any other government department.

I, being the responsible blogger that I seem to be on a part time basis asked a serious lawyer at a serious law firm.  His response is above my  question

Yes, we are gearing up for these type of filings, although the last time I checked the Master of the High Court was not yet geared up to accept filings.

From: Paul Janisch
Sent: 20 June 2023 16:05

Subject:  Trust Beneficial Ownership

It’s a matter of  time before the verification agencies will want to see that this register has at least been submitted.  How have you handled this because the trust has a varied number of beneficiaries and it’s impossible to capture the beneficiaries of each beneficiary?

Thank you

There you have it.  But what concerns me is that the desperately incompetent SANAS will add this submission to the list of reasons to prove all white people are racist.  This register is complicated as BDO noted.  They want ID numbers of each owner.  How the fuck do you do that with broad-based trusts whose beneficiaries change on a monthly  or daily basis. 

It fascinates me that we have these badly thought out policies and the drafters leave them to us to sort out because they aren't paid to work beyond their 2-3 in the afternoon full time job.

My advice - leave it for now. 

 

Ebrahim Patel says broad BEE trusts are genuine - will the commissioner listen

Ebrahim Patel says broad BEE trusts are genuine

Minister strongly supports broad-based ownership schemes including ownership by trusts

Trade, industry & competition minister Ebrahim Patel has come out strongly in support of broad-based ownership schemes including ownership by trusts, which he says are genuine BEE and must be recognised as such.

Patel’s statement, made on Friday at the launch of an expanded worker ownership scheme by Coca-Cola Beverages SA (CCBSA), signals a resolution to the longstanding conflict with BEE commissioner Zodwa Ntuli, who has declared that many broad-based schemes are BEE fronts, which do not qualify as genuine black ownership...

via www.businesslive.co.za

It's locked but you get the picture.  Old Slaptjips has told the awesome what she can do with her odd notions.  I wrote about the commissioner's onoselness here.

I can't find the full statement, this is where he was when he said it.  He's right, this is new territory and I applaud CCBSA for doing it.  There will be many to follow I am sure.

Does the awesome commissioner read the Business Day - or is she going to do nothing other than block the deals that she has blocked this far?

Well done Ebrahim (for now).  Provides some certainty, even if it is somewhat obiter

 

 

Has the commissioner stepped over the trust mark?

It certainly appears so.  This is a strange story because it seems that only Business Day published the story.  And as usual they published behind their paywall so you can't see it.  I do have a copy though and I will lift a paragraph or two for your benefit.

The Black Economic Empowerment Commission, which was set up in the department of trade & industry in 2017, has written to dozens of companies informing them of the need to rectify their ownership structure and undergo reverification of their BEE status or face investigation for fronting.

The companies that she has written to include (reportedly) 

Kagiso Trust, Wiphold Investment Trust, the Sactwu Investment Trust, the Royal Bafokeng Nation Trust, and the Batho Batho Trust, which owns 47,5% of Thebe Investments

This is barely a fraction of the companies that will be affected by this pronouncement.  An email sent out by Sanjay Kassen -head of ENSafrica's B-BBEE practice group noted

To simply state that the vast majority of broad-based B-BBEE trusts are not compliant with the law and constitute fronting is not something that corporate South Africa is going accept easily and such a change would also cause significant instability in a market that is already facing challenging economic conditions.
The threat of criminal sanction where there has been no intention to commit fronting will not, in our view, yield the results the Department of Trade and Industry and the B-BBEE Commission seek to achieve. There needs to be a more collaborative approach between government and corporate South Africa so that there can be a clear direction going forward on broad-based Black ownership.

In other words, if you suddenly cancel the trust rule, expect litigation.  It's also important to note that the commissioner cannot proclaim that this is fronting.  Fronting is in fact a crime - the crime of fraud.  I wrote an extensive piece about fronting a while ago.   This is the essence of what needs to be proven by the NPA (who are tasked with conducting the case)

Proving fronting

Whilst fronting has been specifically created as a crime by the BEE Act, it is suggested that it is very similar to the common law crime of fraud. There are numerous definitions of the term fraud but this oneappears to be the most comprehensive.

"Fraud is the unlawful, intentional making of misrepresentation which causes actual prejudice to another or holds potential prejudice to another"

Five elements must be proved simultaneously for a conviction under fraud, these are

• prejudice,
• misrepresentation,
• unlawfulness,
• causality and
• criminal intent.

Each must be proven by the state beyond a reasonable doubt.

As to when the awesome commissioner is going to to this is anyone's guess.  If you watch the clip below at 4:50, the awesome tells the interviewer that she doesn't have the resources to do this.  I would suggest that the resources in question are qualified personnel and money.  The personnel issue is a major problem for the commission.  Some of the documents that I have read that are so-called findings are ridiculously weak.

 

A bit more on the process.  I am now going to borrow liberally from an opinion written by Bobby Lanham-Love.

Bobby writes the following

we do not consider these reported comments to carry any weight until such time as the Minister formally proposes an amendment to the Act and/or the Codes.

We remind that only Parliament can amend the Act and only the Minister may amend the Codes.

Both these procedures require formal consultation with all stakeholders and are subject to judicial review. We are not currently aware of any formal changes being proposed or tabled.

I agree with him completely.  The commissioner has shot her mouth off, probably with an endorsement from some government officials, but she's on her own. The dti have said nothing about this at all, and they have posted media statements in the last few days, none of which refer to the commissioner.  Even the commissioner's own website says nothing.

And now what?

There is little doubt that this is what the aNc wants.  The commissioner is not doing anything that is not aNc policy.  I agree with this editorial 

since 2015 we have gone back to a narrower form of BEE, first by introducing punitive scoring for companies that chose not to do equity deals, and now by placing limits on broad-based trusts.  It can only be expected that the goal posts will shift again in the future.

It is now up to a vigilant private sector to make sure that they don't shift those goal posts.

In the interim, the commissioner is barking up a shothole bored tree and we can safely ignore her.