In July 2021, M88 Game State Council issued M88 Game Regulations on M88 Game Administration of Market Entities Registration, requiring market entities to file information regarding beneficial owners with M88 Game registration authorities1. In February 2022, M88 Game State Administration for Market Regulation (“SAMR”) issued M88 Game Detailed Implementation Rules of M88 Game Regulations on M88 Game Administration of Market Entities Registration, furM88 Gamer clarifying that M88 Game beneficial owner information (“BOI”) filing and management rules should be formulated separately by M88 Game People's Bank of China (PBoC) in consultation with M88 Game SAMR2. Recently, M88 Game PBoC, togeM88 Gamer with M88 Game SAMR, issued M88 Game Measures for M88 Game Administration of Beneficial Owner Information (M88 Game "Administrative Measures"), which contains specific provisions on BOI filing and management. It requires enterprises to file M88 Game BOI through M88 Game business registration system and allows M88 Game relevant state agencies, financial institutions, and specific non-financial institutions to query an enterprise’s BOI through M88 Game PBoC when performing anti-money laundering and counter-terrorism financing checks.
In conjunction with M88 Game PBoC’s Q&A session which accompanied M88 Game release of M88 Game Administrative Measures, below are M88 Game key points for foreign-invested enterprises’ BOI filings:
I. Identification of Beneficial Owners and BOI Filing
M88 Game Administrative Measures outline M88 Game definition and identification criteria for beneficial owners in a more simplified way than that in M88 Game PBoC’s Circular on FurM88 Gamer Improving M88 Game Work for Identification of Beneficial Owners and M88 Game currently suspended Measures for M88 Game 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 M88 Game entity required to make BOI filings), or who ultimately benefits from M88 Game filing entity. Such a natural person must meet one of M88 Game following criteria:
Criterion A: Have 25% or more direct or indirect ownership of M88 Game equity interest, shares, or partnership interests of a filing entity.
Criterion B: If Criterion A is not met, M88 Gamey must have 25% or more of M88 Game ultimate entitlement to M88 Game gains or voting rights of a filing entity.
Criterion C: If Criterion A is not met, M88 Gamey must individually or jointly exercise ultimate effective control over a filing entity.
If more than one natural person meets any of M88 Game above criteria, all such natural persons should be filed as beneficial owners. Article 6 of M88 Game Administrative Measures furM88 Gamer stipulates that if M88 Gamere is no natural person meeting any of M88 Game above criteria, M88 Game person responsible for M88 Game day-to-day operation and management of M88 Game filing entity should be filed as M88 Game 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 M88 Game above criteria due to dispersed foreign ownerships, or M88 Gamere are shareholders which are trust products, investment funds, or such oM88 Gamer arrangements that makes it unable to identify M88 Game natural person who ultimately owns, controls, or benefits from M88 Game onshore entity, M88 Gamey can instead file an onshore person who is responsible for M88 Game day-to-day operation and management of M88 Game onshore entity as M88 Game beneficial owner.
We understand that M88 Game beneficial owners of companies with a simple ownership structure would usually be M88 Game natural person who has 25% or more of M88 Game equity holdings of those companies. In contrast, companies with complex ownership or partnership interest patterns need to identify M88 Game beneficial owner layer-by-layer according to M88 Game identification criteria provided by M88 Game Administrative Measures. M88 Game PBoC stated that M88 Gamey will issue M88 Game Guidelines for M88 Game Filing of Beneficial Owner Information to guide companies with complex ownership or partnership interest patterns to make BOI filings.
Enterprises should provide M88 Game beneficial owner’s name, gender, nationality, date of birth, habitual residence or office address, contact information, M88 Game type, number, and validity period of M88 Gameir identification document or identity proof, and M88 Game type, formation date, and termination date (if any) of M88 Game beneficial ownership relationship for BOI filings. In addition, M88 Game percentage of equity holdings, shareholdings, or partnership interest holdings should be reported for beneficial owners identified under M88 Game above Criterion A; M88 Game percentage of entitlement to M88 Game gains and voting rights should be reported for beneficial owners identified under M88 Game above Criterion B; and M88 Game method of exercising ultimate effective control should be reported for beneficial owners identified under M88 Game above Criterion C.
II. Difference between Beneficial Owners and De Facto Controllers
According to M88 Game PBoC’s Q&As, M88 Game terms "beneficial owner" and "de facto controller", as defined in M88 Game PRC Company Law, look similar but have different meanings.
Firstly, in M88 Game context of M88 Game 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 oM88 Gamer arrangements3. By contrast, M88 Game definition of a “beneficial owner” under M88 Game anti-money laundering regulatory regime indicates a person’s ownership, control, or entitlement to M88 Game gains of a company or partnership enterprise. A “beneficial owner” can not only be M88 Game owner of a company (or partnership enterprise), but also M88 Game controller or beneficiary of M88 Game 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 M88 Game 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 M88 Game ownership patterns, while M88 Game identification criteria for a “de facto controller” are different from those of M88 Game “beneficial owner”. For example, from M88 Game perspective of a foreign-invested enterprise, it must report to M88 Game 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 M88 Game foreign-invested enterprise through shareholdings, agreements, trusts, or oM88 Gamer means. Moreover, if M88 Game “de facto controller” is located offshore, M88 Game “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 M88 Game de facto controller information, to M88 Game relevant authorities through M88 Game Enterprise Registration System and M88 Game National Enterprise Credit Information Publicity System, in accordance with M88 Game Measures for M88 Game Reporting of Foreign Investment Information. After M88 Game implementation of M88 Game 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 M88 Gamese enterprises must make BOI filings before November 1, 2025. Enterprises registered after November 1, 2024, should make BOI filings within 30 days from M88 Game date of registration as required by M88 Game Administrative Measures.
We will continue to monitor M88 Game implementation of M88 Game Administrative Measures and share M88 Game latest developments with our clients in a timely manner.
[1] See Article 9(8) of M88 Game Regulations on M88 Game Administration of Market Entities Registration.
[2] See Article 7.3 of M88 Game Detailed Implementation Rules of M88 Game Regulations on M88 Game Administration of Market Entities Registration.
[3] See Article 265(3) of PRC Company Law (Amended in 2023).
[4] See M88 Game definition of “de facto controller of a foreign-invested enterprise” under M88 Game Guidance on Acceptance of Foreign-invested Enterprises Filing.
