7. What is the definition of a controlling person in terms of the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS)?

A controlling person(s)* is/are the natural person(s) who exercise(s) control over an entity*. Where the entity is treated as a passive non-financial [foreign] entity* (passive NFE), a financial institution* must determine whether or not the controlling person(s)* is/are a reportable person(s)*.

All beneficial owners are controlling persons, but not all controlling persons are beneficial owners, because the Financial Intelligence Centre Amendment Act (FICA)* South Africa does not regard a trust, or partnership, or association as a legal person.

A controlling ownership interest depends on the ownership structure of the company. It may be based on a threshold, e.g., any person owning more than a certain percentage of the company (e.g., 20% for Namibia and Zimbabwe, 25% for Eswatini and Lesotho), or on who exercises ultimate effective control over the entity.

Under FATCA, in the case of a trust the controlling person(s) may be the settlor(s), trustee(s), protector(s) (if any), beneficiary/beneficiaries or class(es) of beneficiaries, or any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership). Under the CRS the settlor(s), trustee(s), protector(s) (if any), and the beneficiary/beneficiaries or class(es) of beneficiaries is/are always treated as a controlling person(s) of a trust, regardless of whether or not he/she/they exercise(s) control over the activities of the trust.

Where the settlor(s) of a trust is/are an entity/entities, financial institutions must also identify the controlling person(s) of the settlor(s) and, when required, report such controlling person(s) as a controlling person(s) of the trust. In the case of a legal arrangement other than a trust, such term means a person(s) in an equivalent or similar position(s).

In the case of a partnership, information must be obtained for the following controlling persons:

• Every partner, including every member of a partnership en commandite, being a partnership whose partners’ names are not disclosed.
• The person who exercises executive control over the partnership.
• Each natural person who purports to be authorised to establish a business relationship or who can enter into a transaction with the accountable institution on behalf of the partnership.

The following are deemed to be controlling persons: 

1. For a company

• Each natural person who directly owns the required % as per local legislation, e.g., 20% for Namibia, 20% for Zimbabwe, 25% for Eswatini and Lesotho of the company's shares.
• Where the company's shares are owned directly by an entity each natural person who is the ultimate beneficial holder and indirectly owns the required % as per local legislation e.g., 20% for Namibia and Zimbabwe, 25% for Eswatini and Lesotho of the company's shares.
• Each natural person who exercises control (the ability to influence materially the outcome of a vote at a general meeting or appointor veto the appointment of the directors of the entity) through other means such as personal connections or contractual relationships.
• If, despite reasonable effort, the information required in the above bullet points cannot be obtained, then each natural person who holds a senior management position and exercises executive control over the daily or regular affairs of the company, filling the position of chief executive officer, chairman of the board, chief financial officer, chief operating officer or similar positions.

2. For a trust

• Settlor
• Founder
• Donor
• Trustee
• Beneficiary/Beneficiaries

3. For a partnership of entities

• Each natural person who is the ultimate beneficial holder of more than the required % as per local legislation e.g., 20% for Namibia and Zimbabwe, 25% for Eswatini and Lesotho of the partnership interest.
• Each natural person who exercises control through other means such as personal connections or contractual relationships.
• Each natural person who controls the business decisions of the partnership, in terms of the partnership agreement.

4. For a partnership of natural persons

• All partners of the partnership.

5. For a social club, stokvel or and associations

• All natural persons authorised to manage the affairs of the social club, stokvel or association in terms of the constitution.

6. For a cooperative

• The managing/executive director or person(s) in a similar capacity.

7. For a close corporation

• All members of the close corporation.

Note: The term “controlling person” is relevant when applying due diligence and reporting procedures only to passive non-financial [foreign] entities/non-financial entities.

*For any defined terms pl ease see the Table of terms and definitions.