New Measures | Beneficial Owner Filing System in China (1)
To enhance market transparency, maintain market and financial order, prevent and curb money-laundering and terrorist financing activities, and following the relevant laws and administrative regulations on anti-money-laundering and business registration and management, on 29 April 2024, the People’s Bank of China (PBOC) and the State Administration for Market Regulation (SAMR) jointly issued an Administrative Measures on Beneficial Owner Information (hereinafter as the Measures), which will take effect from November 1, 2024.
- What is a beneficial owner?
According to the Measures, a beneficial owner refers to a natural person who ultimately owns or controls the registered entity or enjoys the ultimate benefits of the registered entity, usually known as the Ultimate Beneficial Owner (UBO).
- How to determine the beneficial owner?
According to the Measures, a beneficial owner refers to a natural person* who ultimately owns or controls the registered entity or enjoys the ultimate benefits of the registered entity, usually known as the Ultimate Beneficial Owner (UBO).
A natural person who meets one of the following criteria is the beneficial owner of the subject of the filing:
- who ultimately owns more than 25% of the equity, shares, or partnership interests in the subject of the filing, either directly or indirectly.
- who does not meet Criterion 1 but ultimately enjoys more than 25% of the income and voting rights of the subject of the filing.
- who does not meet Criterion 1, but individually or jointly exercises effective control over the subject of the filing.
The beneficial owner may be more than one natural person, and any natural person who meets one of the three criteria above should be filed as the beneficial owner. If the beneficial owner cannot be identified by any of the above criteria, the person responsible for the day-to-day management of the business shall be considered the beneficial owner.
Differences: Beneficial Owner and Actual Controller
Beneficial owners are like, but different from, the concept of “Actual Controller” in the Company Law of PRC.
The Actual Controller can be either a legal representative or a natural person.
The Beneficial Owner must be a natural person. The Beneficial Owner includes the three aspects of ownership, control, and benefit. He can be the owner of the company (partnership) as well as the controller and beneficiary. However, the Beneficial Owner needs to be penetrated to natural person(s).
- Purpose and Significance
From a domestic perspective, the establishment of the Beneficial Owner Information (hereinafter the BOI) Filing System is a major initiative to optimize the business environment in China.
China has already promoted the construction of the beneficial owner information filing system by disclosing to the public information on the main shareholding structure of enterprises in the National Enterprise Credit Information Publicity System (hereinafter the Publicity System).
The disclosure of such information in the Publicity System can more clearly reflect the shareholding structure of the company and other subjects as well as their ultimate control and beneficiary situation, improve market transparency, enhance information symmetry and mutual trust among business subjects, and improve transaction security and efficiency.
At the same time, the beneficial owner information filing system helps to prevent, at the source, irregularities such as shell companies, false capital injections, and nested shareholdings, and helps to combat illegal and criminal activities such as telecommunication network fraud and helps to prevent and curb corruption.
From an international perspective, the BOI Filing has become an international standard requirement and a common international practice.
The Group of Twenty (G20) has been promoting the improvement of beneficial ownership transparency, the World Bank has listed the beneficial owner registration and filing system as an important indicator in its assessment of the business environment, and the Financial Action Task Force (FATF) has listed it as an important indicator in its international assessment of anti-money-laundering.
Currently, all major economies in the world have established such a BOI filing system.
Please keep focusing on our next sharing about more key points of the measures.
If you have any questions, please contact us.
References:
People’s Bank of China
http://www.pbc.gov.cn/english/
State Administration for Market Regulation (SAMR)
https://sjfg.samr.gov.cn/law/pageInfo/main.main
Administrative Measures for Beneficial Owner Information
http://www.pbc.gov.cn/tiaofasi/144941/144957/5342579/index.html
Document Number: Order No. 3 [2024] of the People’s Bank of China and the State Administration for Market Regulation
