By Auren Freitas dos Santos
With the launch of the Beneficial Ownership (BO) register by the Companies and Intellectual Property Commission (CIPC) on 1 April 2023, significant changes have been introduced that affect various entities, including Home Owners Associations (HOAs). As some HOAs operate as a Non-Profit Company (NPC) with members, it is crucial for these entities to understand how the BO regulations apply to them. It is important to note that the BO regulations do not apply to HOAs that operate as common law associations.
Impact on HOAs operating as NPCs with Members
HOAs, operating as NPCs, are required to comply with the BO regulations like any other company or close corporation. The primary objective of these regulations is to maintain a repository of natural persons who own or control legal entities. In the case of HOAs, the “beneficial owners” are typically the members who have significant control or influence over the entity through ownership of property within the estate.
The CIPC’s BO register is a strategic tool designed to ensure that competent authorities have timely access to accurate ownership information, thereby strengthening the ability to combat money laundering and terrorism financing.
Registration of Members
Members must be registered as beneficial owners if they meet the threshold of more than 5% ownership or control. Since the members of an HOA are generally the property owners within the estate, each member who holds a significant stake in the HOA (i.e., owning property that constitutes more than 5% of the total) should be recorded in the BO register. For example, in an estate with fewer than 20 property owners, each owner would automatically be considered a beneficial owner.
The information required includes the full name, date of birth, identity or passport number, residential and postal address, and the extent of ownership or control. Failure to comply with these requirements can result in administrative penalties, including fines and other sanctions.
Multiple Owners of a Single Property
In cases where a property is owned by multiple individuals, each owner must be considered for registration under the BO requirements. The ownership percentage of each individual must be calculated, and if any owner’s stake exceeds the 5% threshold, their information must be filed with the CIPC as a beneficial owner.
Updates to CIPC Upon Property Sale
When a property within the HOA is sold, the ownership details must be updated with the CIPC. The BO register should reflect any changes in the beneficial owners, meaning the details of the previous owner(s) must be removed, and the new owner(s) must be registered if they meet the 5% threshold. It is important to note that these updates must be made within ten business days of any changes occurring.
Additionally, HOAs must file their BO information within 30 days of their next anniversary date (similar to annual returns) or within 10 days of incorporation if they were registered after 24 May 2023. From July 1, 2024, companies will not be able to file their annual returns unless they have also filed their BO information for the calendar year.
Registration of Property Ownership Details
Rather than registering the property itself, the BO regulations require the registration of natural persons who exercise control or ownership over the entity. While the deeds contain ownership details, the focus of the BO register is on the individuals who ultimately control or influence the HOA. Therefore, it is the beneficial owners (i.e., the members with significant stakes) who must be registered, rather than the property itself.
Filing Process and Documentation
The process of filing beneficial ownership with the CIPC involves creating an account on the CIPC’s e-services platform, adding the company, and creating a share register if applicable. Authorised individuals, who must have a valid mandate from the HOA, are required to submit the necessary documentation, including a mandate to lodge beneficial ownership, a register of beneficial owners, and certified copies of the beneficial owners’ identity documents.
Once filed, the CIPC will issue a Beneficial Ownership Confirmation Certificate, indicating compliance with the BO regulations. It is essential for HOAs to ensure that all required documents are submitted promptly to avoid any compliance issues that could lead to penalties.
Understanding and complying with the BO Regulations is crucial for HOAs operating as NPCs. Proper registration and timely updates to the CIPC ensure transparency and help avoid potential legal complications. Should you have any further questions or require assistance, please contact us at info@theadvisory.co.za for a no-obligation quote. We’re here to help you navigate these requirements efficiently and effectively.
Specialist Community Scheme Attorney (LLB, LLM), Auren Freitas dos Santos, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Reach out to him at info@theadvisory.co.za if you have questions regarding beneficial ownership within your HOA.
