In July 2021, the State Council issued the Regulations on the Administration of Market Entities Registration, requiring market entities to file information regarding beneficial owners with the registration authorities1. In February 2022, the State Administration for Market Regulation (“SAMR”) issued the Detailed Implementation Rules of the Regulations on the Administration of Market Entities Registration, further clarifying that the beneficial owner information (“BOI”) filing and management rules should be formulated separately by the People’s Bank of China (PBoC) in consultation with the SAMR2. Recently, the PBoC, together with the SAMR, issued the Measures for the Administration of Beneficial Owner Information (the “Administrative Measures”), which contains specific provisions on BOI filing and management. It requires enterprises to file the BOI through the business registration system and allows the relevant state agencies, financial institutions, and specific non-financial institutions to query an enterprise’s BOI through the PBoC when performing anti-money laundering and counter-terrorism financing checks.
In conjunction with the PBoC’s Q&A session which accompanied the release of the Administrative Measures, below are the key points for foreign-invested enterprises’ BOI filings:
I. Identification of Beneficial Owners and BOI Filing
The Administrative Measures outline the definition and identification criteria for beneficial owners in a more simplified way than that in the PBoC’s Circular on Further Improving the Work for Identification of Beneficial Owners and the currently suspended Measures for the Administration of Financial Institutions’ Work on Customer Due Diligence and Customer Identity Information and Transaction Records Retention. A “beneficial owner” is a natural person who ultimately owns or has ultimate effective control over a filing entity (as the entity required to make BOI filings), or who ultimately benefits from the filing entity. Such a natural person must meet one of the following criteria:
Criterion A: Have 25% or more direct or indirect ownership of the equity interest, shares, or partnership interests of a filing entity.
Criterion B: If Criterion A is not met, they must have 25% or more of the ultimate entitlement to the gains or voting rights of a filing entity.
Criterion C: If Criterion A is not met, they must individually or jointly exercise ultimate effective control over a filing entity.
If more than one natural person meets any of the above criteria, all such natural persons should be filed as beneficial owners. Article 6 of the Administrative Measures further stipulates that if there is no natural person meeting any of the above criteria, the person responsible for the day-to-day operation and management of the filing entity should be filed as the beneficial owner. This means that if a foreign-invested company or partnership enterprise (such as a QFLP fund) has no natural person meeting any of the above criteria due to dispersed foreign ownerships, or there are shareholders which are trust products, investment funds, or such other arrangements that makes it unable to identify the natural person who ultimately owns, controls, or benefits from the onshore entity, they can instead file an onshore person who is responsible for the day-to-day operation and management of the onshore entity as the beneficial owner.
We understand that the beneficial owners of companies with a simple ownership structure would usually be the natural person who has 25% or more of the equity holdings of those companies. In contrast, companies with complex ownership or partnership interest patterns need to identify the beneficial owner layer-by-layer according to the identification criteria provided by the Administrative Measures. The PBoC stated that they will issue the Guidelines for the Filing of Beneficial Owner Information to guide companies with complex ownership or partnership interest patterns to make BOI filings.
Enterprises should provide the beneficial owner’s name, gender, nationality, date of birth, habitual residence or office address, contact information, the type, number, and validity period of their identification document or identity proof, and the type, formation date, and termination date (if any) of the beneficial ownership relationship for BOI filings. In addition, the percentage of equity holdings, shareholdings, or partnership interest holdings should be reported for beneficial owners identified under the above Criterion A; the percentage of entitlement to the gains and voting rights should be reported for beneficial owners identified under the above Criterion B; and the method of exercising ultimate effective control should be reported for beneficial owners identified under the above Criterion C.
II. Difference between Beneficial Owners and De Facto Controllers
According to the PBoC’s Q&As, the terms “beneficial owner” and “de facto controller”, as defined in the PRC Company Law, look similar but have different meanings.
Firstly, in the context of the PRC Company Law, a “de facto controller” refers to a person who can exercise effective control over a company’s activities through investment relationships, agreements, or other arrangements3. By contrast, the definition of a “beneficial owner” under the anti-money laundering regulatory regime indicates a person’s ownership, control, or entitlement to the gains of a company or partnership enterprise. A “beneficial owner” can not only be the owner of a company (or partnership enterprise), but also the controller or beneficiary of the company (or partnership enterprise).
Secondly, a “de facto controller” can be a legal person or a natural person, while a “beneficial owner” must be a natural person. A “beneficial owner” should be the natural person who ultimately owns or has ultimate effective control over a filing entity, or who ultimately benefits from a filing entity, which needs to be identified layer-by-layer through the ownership patterns, while the identification criteria for a “de facto controller” are different from those of the “beneficial owner”. For example, from the perspective of a foreign-invested enterprise, it must report to the Ministry of Commerce information about its “de facto controller”, who should be a natural person, enterprise, government agency, or international organization that ultimately exercises direct or indirect control over the foreign-invested enterprise through shareholdings, agreements, trusts, or other means. Moreover, if the “de facto controller” is located offshore, the “de facto controller” required to be reported should be an overseas listed company, overseas natural person, foreign government agency (including government funds), or international organization4.
III. Reporting Requirements for Foreign-invested Enterprises
Currently, foreign-invested enterprises should report information, such as the de facto controller information, to the relevant authorities through the Enterprise Registration System and the National Enterprise Credit Information Publicity System, in accordance with the Measures for the Reporting of Foreign Investment Information. After the implementation of the Administrative Measures on November 1, 2024, foreign-invested enterprises will also need to make BOI filings through relevant business registration system. Notably, a one-year grace period is available to enterprises registered before November 1, 2024, which means these enterprises must make BOI filings before November 1, 2025. Enterprises registered after November 1, 2024, should make BOI filings within 30 days from the date of registration as required by the Administrative Measures.
We will continue to monitor the implementation of the Administrative Measures and share the latest developments with our clients in a timely manner.
[1] See Article 9(8) of the Regulations on the Administration of Market Entities Registration.
[2] See Article 7.3 of the Detailed Implementation Rules of the Regulations on the Administration of Market Entities Registration.
[3] See Article 265(3) of PRC Company Law (Amended in 2023).
[4] See the definition of “de facto controller of a foreign-invested enterprise” under the Guidance on Acceptance of Foreign-invested Enterprises Filing.
