Understanding Changes in Persons with Significant Control (PSC) at CIPC in South Africa

The introduction of Persons with Significant Control (PSC) regulations by the Companies and Intellectual Property Commission (CIPC) and the alignment of tax reporting with the South African Revenue Service (SARS) is a significant step toward fostering a more transparent and accountable business environment in South Africa.

Business owners and operators need to be aware of their responsibilities under these regulations, including the creation and maintenance of accurate PSC Registers, timely submission of information to the CIPC, and consistent reporting to SARS.

Adherence to these regulations not only ensures compliance with the law but also contributes to the integrity and credibility of the business community in the country.

What is a Person with Significant Control (PSC)?

A Person with Significant Control refers to an individual or legal entity that holds substantial influence or control over a company's operations, financials, and decision-making processes.

This can include direct or indirect control through shareholding, voting rights, or other means. The concept of PSCs aims to enhance transparency and prevent illicit activities such as money laundering, tax evasion, and corruption.

This has been applicable in the United Kingdom since 2016 so South Africa is just following suit with the rest of the world.

CIPC's Role:

The Companies Act of 2008 was amended to introduce the requirement for companies to identify and disclose their Persons with Significant Control. This regulation aims to create a more open and transparent business environment while also assisting in the detection of fraudulent activities.

Key Components of the Change:

Disclosure Requirement: Companies registered with the CIPC are now obliged to maintain a register of Persons with Significant Control, known as the "PSC Register." This register must be accurate, up-to-date, and readily accessible for inspection.

Information to be Recorded: The PSC Register should include details about individuals or entities that hold significant control. This includes their full names, ID or registration numbers, nationality, residential or registered addresses and details about the nature of their control or influence over the company.

Responsibility of Companies: It is the responsibility of the company to identify and gather the required information about their PSCs. Failure to comply with these regulations can result in penalties or legal consequences.

Submission to CIPC: Companies must submit the information from the PSC Register to the CIPC within a prescribed period, as outlined in the Companies Act.

Ongoing Updates: The PSC Register should be updated as changes occur. Any alteration in significant control should be reflected in the register and submitted to the CIPC.

SARS's Involvement:

In alignment with the increased focus on transparency and accountability, the South African Revenue Service (SARS) has also taken steps to ensure that tax information is consistent with the information reported to the CIPC.

Tax Implications:

Consistency in Reporting: Businesses need to ensure that the information reported to SARS regarding shareholding, ownership, and control aligns with the information submitted to the CIPC.

Discrepancies could raise concerns and trigger audits or investigations. We have noticed that on the SARS form for companies this is now a requirement that has to be completed.

Anti-Avoidance Measures: SARS is keen to prevent tax avoidance and evasion through intricate ownership structures. Accurate reporting of PSCs helps SARS identify potential irregularities.

Compliance and Penalties: Non-compliance with reporting requirements to both the CIPC and SARS can lead to penalties and legal consequences.

Implications for Businesses:

Transparency and Accountability: The introduction of PSC regulations enhances the transparency of corporate ownership and control structures, thereby reducing the risk of illegal activities and promoting accountability.

Due Diligence: Businesses operating in South Africa need to ensure they have accurate and up-to-date information about their PSCs. This information might be requested during due diligence processes, audits, or business transactions.

Legal Compliance: Non-compliance with PSC regulations can result in financial penalties and legal consequences. Businesses must ensure that they adhere to the disclosure and reporting requirements of both the CIPC and SARS.

Data Security: Given the sensitive nature of PSC information, companies need to prioritise data security to protect against potential breaches.

What we need from you 😊

We have started asking clients for the above information, especially our clients on monthly retainers.

Please work with us to ensure that all submissions are 100% accurate.

Thank you for your cooperation.