“National Treasury, therefore, expects that if South Africa continues to make significant improvements in effectiveness and swiftly exits grey listing, it will have a limited impact on financial stability and costs of doing business with South Africa, particularly if South Africa moves speedily to get out of grey listing.” (National Treasury)

South Africa’s grey listing by the Financial Action Task Force, the global financial watchdog, has led government to hurriedly introduce new “Anti-Money Laundering and Combating Terrorism Financing” measures to combat financial crimes. One of those measure is a new requirement for trustees to disclose all “beneficial owners” of trusts.

In what was unfortunately no April Fool’s Joke, new requirements effective from 1 April 2023 were gazetted without notice and after business hours only on 31 March 2023. They came in the form of amendments to the Trust Property Control Act Regulations, requiring all trustees to establish and record the beneficial ownership of the trust, to keep a record of prescribed information relating to beneficial owners, to lodge same with the Master’s Office, and to keep all information up to date on an ongoing basis.

“Beneficial owner” has a wide definition

The definition of “beneficial owner” includes (logically) all beneficiaries, “a natural person who directly or indirectly owns ultimately owns the relevant trust property”, and “a natural person who exercises effective control of the administration of the trust arrangements…”. It also includes all trustees and the founder – those inclusions seem a lot less logical but that’s the law.

So, what should you do now?

Media reports have highlighted both the heavy penalties for failure to comply with these obligations (a R10 million fine, imprisonment for five years, or both) and the impossibility of trustees complying with those obligations on 1 April as a result of both the timing of the gazette and delays in establishing the requisite Master’s online electronic register.

But the practical issue now is that all trustees must take steps to comply – go to the Master’s “Trust Beneficial Ownership Register” page and follow the instructions there (note – you must be signed into Google to access that link).

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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“…where there is disharmony, the essential test is whether it imperils the Trust estate or its proper administration” (extract from judgment below)

Trustees are of course supposed to work together to protect and further the interests of their trust and its beneficiaries, but the fact is that on occasion serious disputes can and do arise.

If settlement negotiations fail and if there is no alternative but to forcibly remove a trustee our courts have the power to do so, on the application of either the Master of the High Court or of “any person having an interest in the Trust property”.

What must you prove for removal?

As to the grounds on which a court will agree to remove a trustee, a recent Supreme Court of Appeal (SCA) judgment confirms that “loss of mutual trust and respect does not, without more, translate to a ground for the removal of a trustee, or to a conclusion that the Trust property has been imperiled [Put at risk of being harmed, injured, or destroyed]. It must further be established that, as a result, the Trust property has been imperiled or the administration of the Trust and the management of its property are at risk. That is a factual enquiry …The determinative test is always whether any state of affairs – be it incompetence, misconduct, incapacity, or lack of trust and respect among trustees or beneficiaries –  has resulted in the Trust property or its proper administration being placed at risk.” (Emphasis supplied).

Importantly the Court added that in exercising its power to remove a trustee, “the courts do so with circumspection”. 

Your work, in other words, is cut out for you.

Fighting in a family trust – the outcome

• A deceased businessman’s R2.8m share portfolio and a 75% share in a property-owning company were vested in a family trust, in which the deceased’s mother, step-father, brother, wife, adult children and accountant were all involved in one capacity or another.
• In short, relationships between the role-players soured, involving a flurry of accusations and counter-accusations of theft (reciprocal criminal charges being laid), oppressive conduct, conflicts of interest, collusion, vendettas – the list goes on.
• The wife (as trustee and beneficiary) together with her sons (the other beneficiaries), applied for the removal of the trustee in question, and after a long – and no doubt expensive – trek through the courts, ended up in the SCA. 
• Finding on the proved facts that “the state of the relationship of the appellant and the respondent has not imperiled the Trust property or its proper administration. I find no other basis on which it would be in the interests of the Trust and its beneficiaries to remove the appellant” the SCA reversed a High Court order removing the trustee. The trustees are it seems just going to have to work this one through themselves.

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

© LawDotNews