China: Filing Obligation of Beneficial Owner Information from 1 November 2024

published on 29 May 2024 | reading time approx. 4 minutes

A draft revision of the law against Anti-Money Laundering (“AML”) Law (“AMLL”) was promulgated in China on 26 April 2024 to seek opinions from general public. One of the expected key changes is that legal persons and organizations will need to file, update and preserve information on “beneficial owners” in connection with certain transactions. The concept of “beneficial owner” is known also in other jurisdictions. In Germany, for example, the “economic owner” (wirtschaftlich Berechtigter) must be recorded in the transparency register (Transparenzregister) which can be accessed subject to certain preconditions.

Q&A relating to the measures »
Recommendation »

Related obligations in China include, among others, filing and updating of beneficial owner information (“BOI”) at the competent AML authority. This process is referred to as (“BOI-Filing”). The AML authorities will be able to use the beneficial owner information in accordance with the law, as required for performing their duties. Financial institution and specific other obliged non-financial institutions must check the beneficial owner information when supporting certain transactions.

Complementing the draft AML, the Administration Measures on Beneficial Owner Information (“Measures”)) were published on 29 April 2024. They were adopted by the People’s Bank of China (“PBC”), reviewed by State Administration for Market Regulation (“SAMR”), and ultimately approved by the State Council, were published on 29 April 2024. The Measures will comeenter into effect on 1 November 2024.

Q&A relating to the measures

Which entities are subject to a BOI-Filing?

The obligation applies to companies, partnerships, branches of foreign companies and other entities stipulated by PBC and SAMR.

The following companies will need to comply with BOI-Filing starting from 1 November 2024:

having a registered capital of more than RMB 10 million, or
having shareholders, at least one of which is a legal person, or
having an actual natural person controller or beneficiary other than its (direct) shareholders.

This means that, e.g., all foreign-invested enterprises who have a legal person shareholder (e.g., a GmbH in Europe as shareholder), will need to do a BOI-Filing.

Which entities are exempted from a BOI-Filing?

Individually-owned business are not required to file beneficial owner information. These are natural persons registered according to the law to engage in industrial or commercial operations.

In addition, entities (except for individually-owned businesses) will be exempted from the this filing obligation upon commitment that they fulfill all the following preconditions:

having a registered capital of RMB 10 million or less; and
its shareholders and partners all being natural persons; and
no other natural person other than its shareholders or partners actually controlling the entity or deriving gains from it in any ways.

Where does the BOI have to be filed?

SAMR will establish a filing system and the local authorities shall supervise entities to promptly file the BOI. The BOI shall then be forwarded to PCB. PCB shall establish an information management system to receive, retain and process the BOI.

Who is the beneficial owner?

A beneficial owner is a natural person who ultimately owns or actually controls an entity, or who enjoys the ultimate benefits in the entity. A natural person who satisfies the following criteria is deemed as beneficial owner of an entity:

ultimately owning more than 25 percent of the equity, shares or partnership interest in the entity directly or indirectly; or
ultimately enjoying more than 25 percent of the profit or voting rights of the entity; or
exercising actual control over the filing entity separately or jointly.

In the absence of the above three circumstances, the person in charge of daily operation and management of the filing entity shall be deemed as beneficial owner. For wholly State-owned company or State-controlled companies, the legal representative shall be filed as beneficial owner. The beneficial owner of a branch of a foreign company is the beneficial owner determined by the foreign company according to the above rules, plus the senior executive of the branch.

When to complete the BOI-Filing?

For newly entities to be established and which must complete BOI-Filing, they shall file BOI when applying for the establishment registration or latest within 30 days after the establishment registration.

For entities established before 1 November 2024 and which must complete BOI-Filing, they must do this by 1 November 2025.

What information shall be submitted during BOI-Filing?

To be submitted are:

name, gender, nationality, date of birth
address of habitual residence or workplace, contact details
type, number and period of validity of the identity certificate and
type of the beneficial ownership relationship, date of formation and termination (if any), the ratio of equity, shares or partnership interests held, the ratio of usufruct or voting right or method of actual control.

What is the possible penalty in case of breach of the Measures?

Administrative authorities may request corrections or impose administrative fines (under CNY 50,000 in case of a rejection of the requested correction).

Recommendation

In summary, the new amendments to the AML Law in China and the associated Measures will have a significant impact on companies and legal entities. The obligation to disclose beneficial ownership information will increase transparency and help to combat money laundering more effectively.

It is important that foreign-invested companies that are required to conduct a BOI-Filing to understand the new requirements and take appropriate steps to ensure that they comply with the law. We recommend first identifying the correct reportable beneficial owner(s) and obtaining the necessary personal information from them. Depending on where a beneficial owner is located, this may require compliance with data protection regulations and increase the administrative burden of obtaining necessary written consents.

If necessary, companies should also consider restructuring in order to fulfil the requirements, for example if an identified beneficial owner does not wish to be listed with the AML authority. Any restructuring required in this case can be carried out before 1 November 2025.