On 29 April 2024, the People’s Bank of China (“PBOC”) and the PRC State Administration for Market Regulation (“SAMR”) jointly issued the Measures on the Management of Beneficial Owner’s Information (the “Measures”), which for the first time expressly requires all companies and other entities in China to file information on their beneficial owners (the “Filing”), unless an exemption is provided. These Measures are intended to improve market transparency as well as to prevent and contain money laundering and terrorism financing. The Measures are a substantial move to implement the relevant filing requirements under the PRC Administrative Regulations on the Registration of Market Entities issued several years ago. The Measures will take effect from 1 November 2024. We set out below a summary of the filing requirements under the Measures.
Who is to file
All companies, partnership enterprises and foreign company branches registered in China as well as other entities prescribed by the PBOC and SAMR (collectively “Filing Entities”) shall be obligated to make the Filing. However, such entities with a registered capital of no more than RMB 10 million and with solely natural person shareholders and partners and which are not subject to actual control or beneficial ownership by any natural person other than their shareholders and partners or control by any means other than equity holding or partnership interest, may give an undertaking as a substitute for the Filing.
Filing coverage
The Filing will trace up to the natural person who ultimately owns or actually controls the Filing Entity or enjoys the ultimate beneficial ownership of the Filing Entity. Any natural person who satisfies any of the following criteria shall be identified as a beneficial owner and shall be required to be covered in the Filing:
(i) ultimately owns more than 25% of equity, shares or partnership interest in a Filing Entity by direct or indirect means;
(ii) ultimately enjoys more than 25% beneficial ownership or voting rights of a Filing Entity; or
(iii) solely or jointly has actual control over a Filing Entity. “Actual control” herein includes without limitation the control exercised by way of agreement or through any closely-related person or otherwise, such as the right to appoint the legal representative, directors or senior management, or take significant operational and management decisions, etc.
A Filing Entity that has no individual satisfying any of the foregoing criteria shall treat the personnel in charge of its daily operations as its beneficial owners.
The beneficial owners of the branch of a foreign company shall include the beneficial owners of the foreign company as identified according to the foregoing criteria as well as the branch’s own senior management.
What is to be filed
The name and other identity information and contact details of the beneficial owner as well as the type, term (if any) and ratio of beneficial ownership shall be filed.
When to make the filing
The Filing shall be made through an online registration system when applying for the establishment of the Filing Entity. If the online system is not functioning, the Filing may be made in person, to be followed by the filing with the online registration system within 30 days after establishment of the Filing Entity. In case of any change to the filed information or a Filing Entity ceases to be eligible to be exempted from the Filing, a Filing shall be made within 30 days of the occurrence of the change or the loss of the exemption.
Those Filing Entities formed before the Measures take effect on 1 November 2024 will have one-year grace period for making the Filing, which must be done by 1 November 2025.
Who may access the filed information
The filed information will not be available to the public but will only be made available in accordance with the law through the PBOC system to the government authorities, financial institutions and special non-financial institutions, which need such information to fulfil their duties or satisfy the anti-money laundering and anti-terrorism financing obligations.
What will happen on a failure to file
In the case of a failure to file or an incorrect Filing, the Filing Entity may be ordered to make the filing or correct the error within a prescribed period, and in the case of a failure to follow such order, a fine of less than RMB 50,000 may be imposed.
Impact
The PBOC and SAMR will in the future issue filing guidelines to help the Filing Entities identify beneficial owners for the Filing. Investors which already have or intend to set up operations in China will need to ascertain whether their operations are subject to the Filing requirement and prepare for it if required. In particular, entities which do not wish to disclose their ultimate beneficial or equity ownership for whatever reason and wish to keep it confidential by way of agreement, trust, etc. may face challenges and may need to consult with legal and tax professionals on taking the proper actions to meet the Filing requirement.
