UNDERSTANDING THE AMENDMENTS TO THE TRUST PROPERTY CONTROL ACT
Eleanore Hiralall | Attorney: Legal Division
With South Africa now placed on the “grey list” by the Financial Action Task Force (“FATF”), this means that increased monitoring is now required particularly in the area of trust ownership which had a significant lack of transparency.
Changes were therefore made to various pieces of legislation in an attempt to regulate increased monitoring and controls specifically when dealing with anti-money laundering and terror financing, which were found to be weak and having many deficiencies. These changes include amendments to the Trust Property Control Act of 1988, which will be unpacked further hereunder.
Why was the Trust Property Control Act (“TPA”) amended?
Over the years Trusts were seen to be a tool widely abused and misused by many. The intention of the amendments was to bring about transparency, prevent the misuse of Trusts and ensure that there is adequate, accurate, and timely information on the control of Trusts available to the authorities.
When do the amendments become effective?
The changes to the Trust Property Control Act became effective and operational from 1 April 2023, with no grace period being afforded to trustees to ensure compliance.
Which sections in the Trust Property Control Act are impacted by the amendments?
In terms of the amendments, two new definitions were introduced to the TPA together with enhancements to six Sections, as highlighted in the below table.
What is the impact to Trustees and Trusts within South Africa?
The amendments make it a requirement for trustees to be more accountable to the Master of the High Court in terms of disclosure of information such as beneficial owners of trusts (amongst other details). There is now a greater onus placed on trustees to monitor their Trust Deeds and to update information as and when required.
Who is classified as a beneficial owner?
A beneficial owner has been defined to include the following:
- A natural person who directly or indirectly ultimately owns the relevant trust property (this would include a nominee-principal relationship, as well as beneficiaries of a “bewind” trust) – the ultimate beneficiary.
- A natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to the trust deed.
- Each founder of the trust (or if the founder is a legal person or someone acting on behalf of a partnership or in terms of another trust, the natural person who directly or indirectly ultimately owns or exercises effective control over that legal person, partnership or trust).
- Each trustee of the trust (or if the trustee is a legal person or person acting on behalf of a partnership, the natural person who directly or indirectly ultimately owns or exercises effective control of the legal person or partnership).
- Each beneficiary named in the trust deed (or if the beneficiary is a legal person, a partnership or person acting on behalf of a partnership or pursuant to another trust, the natural person who directly or indirectly ultimately owns or exercises effective control of that legal person, partnership or trust).
How can trustees comply with the reporting requirements?
The Master of the High Court (“the Master”) has created a Beneficial Ownership Register which is available electronically for completion and submission. However, accessing this register has proven to be problematic at times. This does not mean that one should not comply with the disclosure requirements. The onus still remains on you, as Trustee to ensure that the necessary information is submitted to the Master even if you are required to attend on the Master’s office personally to comply with these legislative requirements.
What will happen if trustees do not comply with the amendments?
Non-compliance with the TPA, specifically the amendments is a criminal offence which can result in a fine of R10 million or imprisonment up to five years, or both.
Can Trustees outsource their reporting requirements?
The new requirements can be daunting and onerous to trustees. There are legal professionals and other third-party service providers that can act as agents to assist with the reporting requirements subject to signature of a power of attorney giving them authority to act and subject to a fee being paid for services rendered. If trustees are not au fait with the new requirements it would be best to outsource this function to professionals.
Learnings
If you are an existing trustee or in the process of applying to be a trustee, ensure that you familiarize yourself with the new amendments to the Trust Property Control Act and fully understand same or risk facing a fine, imprisonment or both, as the duties and responsibilities required from Trustees are now more onerous. Should you not be in a position to comply with the new requirements seek the assistance of a Professional to assist you in meeting your trust reporting requirements.
For further details or advice in this regard, it is best that you consult with a Legal Practitioner.