South African trusts have come under closer scrutiny in the last couple of months, both from a tax compliance perspective and also as a result of the new rules regarding the disclosure of beneficial ownership.

Trusts are now obliged to submit information regarding beneficial owners to the Master of the High Court. These rules, as well as rules regarding the disclosure of beneficial ownership in respect of assets owned by companies, were introduced to address deficiencies identified by the Financial Action Task Force (FATF) when greylisting South Africa.

Submission of beneficial owner register to the Master of the High Court

In terms of the Trust Property Control Act (TPCA) read with the Regulations issued in terms thereof (Regulations), trustees are subject to new obligations including:

• the obligation to keep records of the beneficial owners of the trust and to submit a register with the prescribed information on the beneficial owners (Register) to the Master’s Office; and
• to record the details of accountable institutions used by the trustees to perform any of the trustees’ functions relating to trust property.

While the rules came into effect on 1 April 2023, they do not prescribe a period within which the Register must be submitted to the Master. The TPCA does however stipulate that the failure by a trustee to submit the Register to the Master is an offence which on conviction, could result in a fine of up to ZAR 10 million and/or imprisonment for a period of up to five years. Trustees should thus ensure that they comply with their obligations in respect of the submission of the Register, as well as in respect of associated institutions.

Register

Our newsflash dated 13 April 2023 (here) provides an overview of those persons who are included in the definition of ‘beneficial owner’. Importantly, in addition to beneficiaries or potential beneficiaries, the definition includes:

• the founder of the Trust; or if the founder is a legal person, the natural person who directly or indirectly ultimately owns or exercises effective control of that legal person; and
• each trustee of the trust.

Notably, the concept of beneficial ownership for the purpose of TPCA reporting must be interpreted based on the context and on the specific set of facts. For example, in the context of a share scheme, a beneficiary who is not specifically named and who does not have a vested right to trust assets but who receives income derived from trust assets, would arguably not qualify as a beneficial owner as defined, although each case would have to be assessed based on the specific facts.

Once the trustees have compiled the prescribed information of the beneficial owners, they must include the information in a Register and submit it to the Master as follows:

• the Register can be accessed from the website of the Master of the High Court, by selecting the link to the ‘Trust Beneficial Ownership Register form and register’ in the ‘Administration of Trusts’ section;
• the person capturing the information must use a Google account to complete the relevant forms, to download the Register (an Excel spreadsheet) and to upload the Register once completed; and
• any changes to the Register must be made using the same process.

Accountable institutions

The trustees must also record the prescribed details relating to the accountable institutions used by the trustees to perform any of the trustees’ functions relating to trust property. There is no obligation to submit such information to the Master, but the trustees must record the details of these organisations.

This seems to be aimed at ensuring that the outsourcing of functions relating to trust property to accountable institutions is duly recorded. The TPCA defines an ‘accountable institution’ to have the meaning as defined in the Financial Intelligence Centre Act (FICA), which definition includes a person who ‘carries on the business of preparing for or carrying out transactions (including as a trustee) related to the investment, safe keeping, control or administering of trust property’ within the meaning of the TPCA.

Persons or organisations who qualify as accountable institutions have to register as such with the Financial Intelligence Centre. 

A trustee who acts as trustee only on an occasional basis or who performs this function in their personal capacity (as opposed to doing so on a commercial basis as a regular feature of their business) would not be carrying on such functions as their business and should thus not be obliged to register with FIC as an accountable institution. However, this would depend on the specific circumstances of each case and trustees are urged to consider whether they could be said to carry on the transactions relating to the investment or administering of trust property as a business, in which case they may be obliged to register in terms of FICA.