On 29 April 2024, the People's Bank of China and State Administration for Market Regulation of the People’s Republic of China (the “PRC”) promulgated the Administrative Measures for Beneficial Ownership Information (the “BOI Measures”). They entered into effect on 1 November 2024. The BOI Measures newly introduced the concept of a “beneficial owner” (the “BO”), in addition to the already existing concept of an “actual controller”.
Already existing: Filing Requirements regarding Actual Controller
Filing requirements regarding the “actual controller” already exist in the PRC since several years.
According to the PRC Measures for Reporting of Information on Foreign Investment (effective as of 1 January 2020), inter alia, information on the “actual controller” of a foreign-invested enterprise (a “FIE”) shall be submitted to the locally competent Authority of Commerce. I.e., this requirement only applies to FIEs, but not to purely domestic PRC entities.
- The PRC Measures for Reporting of Information on Foreign Investment do not contain a definition of the term “actual controller”. According to a definition contained in the PRC Company Law (effective as of 1 July 2024), “actual controller” refers to any person who can exert actual control over a company through any investment relationships, agreements, or other arrangements. According to past guidance by the Authorities of Commerce, the ultimate actual controller is specified to be the natural person, enterprise, governmental organ or international organization which ultimately and actually controls an entity by shares, contract, trust or other means. If the actual controller is a foreigner or a foreign entity, the actual controller shall be tracked down to the level of overseas listed companies, foreign natural persons, foreign governmental organs (including governmental funds) or international organizations.
In practice, often simply the authorized signatories of the foreign investor are indicated as “actual controller” towards the Authorities of Commerce.
- FIEs are required to submit an initial foreign investment information report which contains information on the actual controller through the relevant online enterprise registration system at the time of establishment registration. Where the information of the actual controller in the initial report changes, FIEs shall submit a report of changes through the relevant enterprise registration system within 20 working days after the occurrence of change. In addition, FIEs shall submit an annual report for the preceding year through the National Enterprise Credit Information Publicity System between 1 January and 30 June of each year. The annual report shall also include the information on the actual controller.
New: Filing Requirements regarding BO
In addition to the filing of the information on an FIE’s actual controller as set out under item 1 above, to better perform anti-money laundering and counter-terrorism financing checks, the newly issued BOI Measures introduce filing requirements on information regarding the BO of, generally, all entities located in the PRC, irrelevant of whether they are FIEs or purely domestic PRC entities.
- According to the BOI Measures, companies, partnership enterprises, branches of foreign companies and other entities registered in the PRC shall file BO information through relevant online registration systems to the competent Market Supervision Administration. Companies to be newly established shall make the filing when applying for the establishment registration. Entities which had been established before 1 November 2024 shall file BO information before 1 November 2025.
The BOI Measures allow for an exemption from such filing requirements: a filing entity with a registered capital (or capital contribution) not exceeding RMB 10,000,000 (or its equivalent in a foreign currency), and all of whose shareholders or partners are natural persons, shall be exempt from filing BO information after making a commitment, provided that there is no natural person, other than its shareholders or partners, who exercises actual control over it or receives benefits from it and there is no one who exercises control over it or receives benefits from it through means other than equity or partnership interest.
- The definition of the BO is different from the one of the actual controller. Under the BOI Measures, the BO shall be tracked down to the level of natural person(s).
The BOI Measures provide for 3 criteria to identify the natural person BO of an entity as set out below. If more than 1 natural person meets any of the below criteria, all such natural persons should be filed as BOs.
- According to the BOI Measures, when filing BO information, a filing entity shall generally report the following: name; gender; nationality; date of birth; habitual residence or address of the employer; contact information; type, number and validity period of identity document or identity certificate; and type of beneficial ownership, and the date when the ownership is formed and terminated (if applicable).
If the entity falls under Criterion A above, the proportion of equity, shares or partnership interests it holds shall also be reported; if it falls under Criterion B above, the proportion of profit rights or voting rights shall also be reported; and if it falls under Criterion C above, the means of actual control shall also be reported.
Relevant BO information is classified as non-public information and can only be accessed by governmental departments and anti-money laundering obligated institutions when performing their statutory duties.
- It is further important to note that under the PRC Anti-Money Laundering Law, if a company does not provide BO information to the registration authority timely, the registration authority shall issue a correction order with a specified deadline. Failure to comply with that shall result in a fine of up to RMB 50,000.
All entities located in the PRC should be aware of the new requirement to file BO information, and entities which had been established before 1 November 2024 shall file relevant BO information before 1 November 2025, unless they qualify for exemption.
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