Monday, 29 August 2022 10:10

Beneficial Ownership

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Author: Adrian Makowa

29 August 2022

Anonymity enables many illegal activities to take place hidden from law enforcement authorities, such as insider dealing, tax fraud, bribery and corruption, money laundering and terrorist financing.

Consequently, the issue of who ultimately owns, benefits from or controls entities has become increasingly important internationally as it plays a critical role in transparency, the integrity of corporations, and crime prevention and law enforcement efforts. 

The availability of beneficial ownership information is now a key requirement at international level, and Zambia has not been left behind. The Companies Act, 2017, which came into operation on 15th June 2018, introduces beneficial ownership disclosure requirements for all companies in Zambia, whether incorporated locally or registered as a foreign company i.e., “branch”. The Companies Act, as amended in 2020, defines a beneficial owner (BO) to mean a natural person who-

  • directly or indirectly, through any contract, arrangement, understanding, relationship or any other means ultimately owns, controls, exercises substantial interest in, or receives substantial economic benefit from a company in Zambia (“substantial” is defined as 5% or more), or
  • exercises ultimate and effective control over a legal person or legal arrangement.

Under the Companies Act, 2017:

  • All BOs and/or shareholders of companies in Zambia are required to disclose beneficial ownership of shares and declare their particulars to the company, which must notify the Registrar of Companies at the Patents and Companies Registration Agency (PACRA).
  • The directors and company secretary of a company are obliged to:
  • ascertain beneficial ownership;
  • maintain a register with the prescribed information for BOs; and
  • file notifications at PACRA. The directors must also report on any BO changes in their annual report.
  • The Registrar of Companies is obliged to maintain a Register of BOs alongside the Register of Companies.

It is important to understand that a BO is always a natural person, never an entity. If no natural persons can be identified as the BOs, then the persons who control the last entity in the chain of ownership or benefit are the BOs who must be disclosed, together with details of the entity they control - for example, the directors or trustees of state-owned enterprises, not-for-profit entities, charitable trusts, and listed public companies. Full personal details of all BOs must be disclosed including date of birth, a national identity number and address.

The concept of BO and mandatory disclosures requirements will not only help Zambia preserve the integrity of its systems and corporate citizens but also give foreign commercial partners confidence to build business relationships in Zambia.