ALL ABOUT TRUSTS
Phia van der Spuy
Due to the risk that South Africa may be greylisted this year, Treasury legislated measures on December 22 last year to demonstrate that the government is working to improve shortcomings identified by the Financial Action Task Force mutual evaluation report as threatening the international financial system. Amendments to the following Acts have been made: the Financial Intelligence Centre Act, Non-profit Organisations Act, Trust Property Control Act, Companies Act and Financial Sector Regulations Act.
Trustees should be aware of the changes to the Trust Property Control Act, as non-compliance may lead to a fine not exceeding R10 million or imprisonment not exceeding five years or both.
The following changes were introduced:
- New Section 1 definitions of “accountable institution” and “beneficial owner” (Effective date: April 1, 2023.)
- New Section 6(1A). Section 6 deals with authorisation of a trustee and security. This section specifies matters that would disqualify a person from acting as a trustee. This was brought in line with the existing Section 20 (removal criteria) and more measures were added (Effective from April 1, 2023, except 1(H) – Master to keep public record.)
- Amended Section 8. Foreign trustee to act only if authorised by Master in writing. (Effective date: April 1, 2023.)
- New Section 10(2). Section 10 deals with the trust account. The change requires a trustee to disclose their position as trustee to any accountable institution with which the trustee engages in that capacity and to make it known to that accountable institution. (Effective date: April 1, 2023.)
- New Section 11(1)*. Section 11 deals with the registration and identification of trust property. Trustees are to provide details of accountable institutions which they use as agents to perform trustee functions and which provide any services to trustees. More information and clarification is required to understand what is meant by this requirement. (Effective date: April 1, 2023.)
- New Section 11A*. Information must be kept by trustees in relation to beneficial ownership. Even though founders, trustees, beneficiaries and any persons who can control the votes of, or appoint, trustees or beneficiaries are all (incorrectly) defined as beneficial owners, trustees have to:
- lodge and keep up-to-date records of the beneficial ownership of the trust. (Effective date: April 1, 2023.)
- lodge a register of the prescribed information on the beneficial owners (as defined) with the Master. (No effective date yet.)
- the Master must keep a register in the prescribed form containing the prescribed information about the beneficial ownership of trusts. (No effective date yet.)
- trustees and the Master must make the information contained in the register available to any person as prescribed after consultation with the Minister of Finance and the Financial Intelligence Centre. (No effective date yet.)
- Amended Section 19. Section 19 deals with the failure of a trustee to account or perform duties. Treasury just clarified this section: the Master or any person having an interest in the trust property may apply to the Court to direct the trustee to comply with the Master’s request or to perform duty imposed upon the trustee by the Trust Property Control Act, trust instrument or any other law. Take note: the Master can only remove a trustee under Section 20 if they do not comply with the Act.
- New Section 19(2). If the trustee fails to comply with indicated sections (*) above, they will commit an offence and on conviction will be liable to a fine not exceeding R10 million or imprisonment not exceeding 5 years or both.
- Amended Section 20. Section 20 deals with the removal of trustees. It was added that the Master may remove a trustee if they become disqualified to act as a trustee in terms of the new Section 6(1A); it was also expanded that the trustee may be removed if they do not comply with the requirements of the Trust Property Control Act (over and above the requirement to comply with any duty imposed upon them in terms of the Act).
Conclusion
It is imperative that trustees understand that they will have the duty to meet these new requirements and that if they fail to comply, they may be fined or imprisoned. Family trustees can no longer blindly assume their accountants and trust service providers will keep them out of trouble. Trustees will have to ensure that proper digital systems are implemented to take care of their obligations.
Van der Spuy is a Chartered Accountant with a Masters degree in tax and a registered Fiduciary Practitioner of South Africa, a Chartered Tax Adviser, a Trust and Estate Practitioner and the founder of Trusteeze, the provider of a digital trust solution.