Reporting obligation for trusts: do you understand beneficial ownership and compliance?
Since April 2023, trustees have had a new responsibility under the amended Trust Property Control Act, Act 57 of 1998 (TPCA) to report and maintain accurate records of the beneficial ownership of their trusts. Why has this amendment been made? To improve transparency regarding the ownership of trust assets before assets and income vest in beneficiaries.
Section 11A(1) of the TPCA states that a trustee must:
- Establish and record the beneficial ownership of the trust.
- Keep a record of the prescribed information relating to the beneficial owners of the trust.
- Lodge a register of the prescribed information on the beneficial owners of the trust with the Master’s Office.
- Ensure that the register is kept up to date
Who is a beneficial owner?
The TPCA defines a beneficial owner as an individual(s) who have a stake in a trust, including the founders, trustees, named beneficiaries, and individuals who exercise effective control over the trust. It is important to note that a beneficial owner must always be a natural person. If a legal entity acts as a beneficial owner, the individuals who ultimately benefit from that entity must be recorded as the beneficial owners of the trust.
To comply, trustees must record comprehensive information, in an Excel file, about each beneficial owner on the Master of the High Court’s online portal.
Consequences of non-compliance
Failure to comply with the new reporting requirements has severe consequences. Trustees may face penalties of up to R10 million and/or imprisonment for up to five years. The Master of the High Court or the Financial Intelligence Centre may also impose additional sanctions. It’s important to note that any changes made to a trust and submitted to the Master of the High Court may trigger an inspection of the Beneficial Ownership database, potentially resulting in penalties for non-compliance.