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The Trust Property Control Act 57 of 1988 (hereinafter “the Act”), a pivotal legislative framework governing trusts in South Africa, has recently undergone a significant transformation through the enactment of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act. This regulatory overhaul aims to fortify the nation’s trust governance, a direct response to its greylisting status, and it carries profound implications for trustees, especially those overseeing family trusts.
Expanding the Scope of “Beneficial Ownership”
Among the primary amendments to the act, is the expansion of the term “beneficial owner.” This term now encompasses individuals with both direct and indirect ownership of trust property, such as individuals exerting influence over trust administration, trust founders, trustees, and named beneficiaries. In cases where legal entities fulfil these roles, trustees are now required to identify the natural person(s) who own or control such entities.
Introduction of Section 11A: Recording Beneficial Ownership
The amendment also introduces Section 11A, which mandates trustees to establish and maintain a comprehensive record of beneficial ownership within the trust. This record must be lodged with the Master’s Office via their portal -something Madeleyn Inc offers as a service – and should encompass in-depth details about beneficial owners, including full names, birthdates, nationalities, official identification particulars, residential addresses, contact information, reasons for beneficial ownership, and commencement and termination dates of such ownership. Trustees are additionally responsible for retaining certified copies of the official identification documents of each beneficial owner.
Accountable Institutions and Trust Property Management
Furthermore, trustees are obliged to maintain detailed information about accountable institutions with which they engage for trust property management. These accountable institutions are entities specified in Schedule 1 of the FIC Act 1 of 2017.
Authorisation and Disqualification of Trustees
Another noteworthy amendment is the requirement for each trustee to obtain authorisation from the Master of the High Court before assuming their role as a trustee. Grounds for disqualification from serving as a trustee are explicitly outlined in the act, and a public register of disqualified individuals is to be maintained by the Master.
Enhanced Financial Transparency Measures
The act also introduces stringent measures to ensure financial transparency. All funds received by trustees must be deposited into a distinct trust bank account. When engaging with accountable institutions, trustees must divulge their representative status, thereby clarifying their position concerning trust property.
Ensuring Compliance and Avoiding Penalties
Failure to adhere to the new regulations carries substantial penalties, including the possibility of fines up to R10 million, imprisonment for a maximum of five years, or both.
Elevated Accountability and Compliance Standards
These amendments underline a notable escalation in accountability and compliance expectations for trustees. The concept of dormant trusts no longer holds relevance in this new context; all trusts must register as taxpayers and uphold compliance, lest they come under rigorous scrutiny.
The Role of Expert Assistance and Independent Trustees
These regulations present a formidable challenge, particularly for independent trustees who must ensure the implementation of requisite procedures and the upkeep of current information. This underscores the pivotal role of professional guidance and the advantages offered by independent trustees who can provide valuable counsel and assistance in ensuring adherence to legislation, thus safeguarding trust assets.
These amendments to the Trust Property Control Act signify a significant evolution in trust governance within South Africa. They impose a heightened level of transparency, diligence, and record-keeping upon trustees. While navigating this transformed landscape may appear daunting, seeking expert advice and proactively managing data gathering and record maintenance will guarantee regulatory compliance and uphold the trust’s integrity.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).