China Introduces Requirement on Filing of Beneficial Ownership Information

To enhance market transparency, maintain market and financial order, and prevent and curb money laundering and terrorist financing activities, the People's Bank of China (PBOC) and the PRC State Administration for Market Regulation (SAMR) have jointly issued the Administrative Measures for Beneficial Owner Information (受益所有人信息管理办法, "Measures") introducing a requirement to file information on beneficial ownership. These Measures will come into effect on 1 November 2024. Below are the key highlights of this new requirement.

Scope of Filing Subjects

According to the Measures, companies, partnerships, and branches of foreign companies ("filing subjects") shall file the information of beneficial owners (including names, contact details, beneficial ownership type etc.) via the relevant registration system. However, entities that meet the following conditions may be exempted from the filing obligation:

1. The registered capital of the entity does not exceed RMB10 million (or equivalent foreign currency);
2. All shareholders or partners of the entity are natural persons;
3. There are no natural persons other than shareholders or partners who have actual control over the entity or derive benefits from it; and
4. There is no control over the entity or benefit derived from it through means other than equity or partnership interests.

Definition of Beneficial Owners

According to the Measure, a beneficial owner is defined as a natural person who ultimately owns or actually controls the filing subject, or enjoys the ultimate benefits of the filing subject. The Measures further stipulate that natural persons who satisfy any of the conditions listed below shall be identified as beneficial owners:

1. A natural person who ultimately holds more than 25% of the equity, shares, or partnership interests of the filing subject, either directly or indirectly.
2. A natural person who ultimately enjoys more than 25% of the rights to profits or voting rights of the filing entity, even if Item (a) above is not met.
3. A natural person who exercises actual control over the filing subject, either alone or in conjunction with others, even if Item (a) above is not met.

The term "actual control" in Item (c) includes but is not limited to, exercising control through agreements, close relationships, and other means. This may involve decisions regarding the appointment or dismissal of legal representatives, directors, supervisors, senior management personnel, or managing partners; making or implementing significant business and management decisions; managing financial income and expenses; and having long-term actual use or control over significant assets or main funds.

If none of the three conditions outlined above is met, the individual responsible for the daily management of the entity should be filed as the beneficial owner.

Deadlines for Filing

The Measures require that entities established before 1 November 2024 shall complete the filing by 1 November 2025. For newly-established entities, the filing shall be completed through the relevant registration system at the time of registration of its establishment. In the event that there is a change of the beneficial owner (or its information filed with the registration system) or the entity no longer meets the conditions for exemption, it shall file the information or amended information within 30 days from the date of change or when it does not meet conditions for exemption.

Overall, the Measures signify a significant step towards enhancing market transparency and regulatory oversight, aligning with global standards for the disclosure of beneficial ownership.