The Administrative Measures on Beneficial Owner Information (hereafter referred to as the “Measures”), promulgated by the People’s Bank of China (PBC) and the State Administration for Market Regulation (SAMR), became effective on 1 November 2024.
Purpose and Significance of the Measures
The primary aim of the Measures is to enhance market transparency, safeguard market and financial order, and prevent and combat money laundering, terrorist financing, and other illegal activities. The Measures play an essential role in optimizing the business environment in China by clearly outlining corporate ownership structures and the ultimate control and benefit. This transparency fosters greater information symmetry, trust among business entities, and enhances market efficiency and safety.
From an international perspective, the centralized registration of beneficial owners has become a global standard for anti-money laundering (AML) and anti-corruption efforts. Organizations such as the G20, the World Bank, and the Financial Action Task Force (FATF) promote ownership transparency, making it a critical benchmark in international evaluations. Most major economies have established similar regimes to align with these global standards.
Filing Entities and Identification of Beneficial Owners
Filing Entities
The Measures require the following entities to file beneficial owner information through the relevant registration system:
- companies;
- partnerships;
- branches of foreign companies; and
- any other entities stipulated by the PBC and the SAMR.
Individually-owned businesses are currently exempt.
Entities with a registered capital of less than 10 million yuan (or its equivalent in foreign currency) and whose shareholders or partners are all natural persons may be exempt from filing if no external person has control or benefits through indirect means. This exemption is conditional upon a commitment made by the entity.
For wholly state-owned companies and state-controlled companies, the legal representative shall be filed as the beneficial owner.
Definition and Identification of Beneficial Owners:
A beneficial owner is defined as a natural person who ultimately owns, controls, or benefits from the entity. The concept of a beneficial owner includes ownership, control, and benefits, and it must trace down to a natural person. The criteria for identifying beneficial owners include:
- Direct or indirect ownership of more than 25% of the equity, shares, or partnership interests.
- Enjoyment of more than 25% of the entity’s profits or voting rights.
- Actual control of the entity, such as through agreements, significant influence over decision-making, or financial control.
If no individual meets these criteria, the individual responsible for the daily management of the entity must be recorded as the beneficial owner.
Required Information for Filing
Filing entities required to file must provide the following information:
- Personal details of the beneficial owner: name, gender, nationality, and date of birth.
- Address of habitual residence or workplace.
- Contact information.
- Identification document details, including type, number, and expiration date.
- Nature of beneficial ownership, including how it was established and the relevant dates.
- Ownership or control details, such as the percentage of equity or voting rights if applicable.
Filing must occur at the time of initial registration, and any changes must be updated within 30 days. If registration cannot be completed through the online system, entities may submit filings in person but must update their records online within 30 days of establishment.
Entities registered before November 1, 2024, must ensure compliance by November 1, 2025.
Consequences of Non-Compliance
Article 14 of the Measures outlines the consequences for non-compliance with the filing requirements for beneficial owner information:
- Failure to File: Any entity that does not file beneficial owner information as required will be subject to punishment according to the relevant administrative regulations related to enterprise registration.
- Inaccurate Information: If the PBC or its branches discover that the beneficial owner information filed is inaccurate, they will issue an order for the entity to correct the information within a specified timeframe.
- Penalties for Non-Correction: If the entity fails to make the necessary corrections within the stipulated period, a fine of up to 50,000 yuan may be imposed.
Information Protection and Compliance Measures
Information Protection
China ensures that beneficial ownership information is kept confidential and is not publicly disclosed. This information is accessible only to government agencies and AML institutions performing their statutory duties, similar to policies in countries such as the U.S. and Singapore.
Compliance Facilitation
To simplify the filing process for small and micro enterprises, eligible entities can use a “commitment exemption” where they acknowledge compliance by selecting a confirmation within the system, exempting them from detailed filing. The PBC will issue guidance to support entities in meeting these requirements.
Recommendations for Compliance
With the Measures now in effect, it is critical for businesses to review their ownership structures and ensure compliance. Companies with complex ownership or control arrangements, such as those involving contractual control or layered structures, should evaluate whether they meet the criteria to avoid potential legal repercussions related to non-disclosure or inaccurate information filing. Proactive preparation and transparency will be essential for aligning with these regulations and preventing associated risks.
