25 January 2022
On 27 December 2021, the State Administration for Market Regulation of the People’s Republic of China (“SAMR”) and the People’s Bank of China (“PBOC”) jointly published a draft of the “Interim Measures on Information Filing of Ultimate Beneficial Owners of Market Players” (“Interim Measures”) for comment. The consultation closes on 26 January 2022.
Article 1 of the Interim Measures, which are formulated in accordance with the Anti-Money Laundering Law and the Regulations on the Administration of Registration of Market Players, specifies that the purpose of the Interim Measures is to enhance the transparency of market players and improve the business environment.
The Interim Measures specify the information disclosure requirements applicable to companies, partnerships and foreign corporations’ branch offices established under the law of the People’s Republic of China (“PRC”) (“Market Players”).
The Interim Measures provides that it will come into force on 1 March 2022.
This article sets out some of the key features of the Interim Measures.
1. Obligation to file
Companies, partnerships and branch offices of foreign companies shall file information relating to their ultimate beneficial owners (“UBO”) with SAMR through its online filing system. Non-corporate enterprise legal persons, sole proprietorship enterprises and farmers’ professional cooperatives are temporarily exempted from this requirement. The Interim Measures stipulate that SAMR will share this information with PBOC, but the UBO information should be kept strictly confidential without being disclosed to the public, and only certain authorities and/or financial institutions will be granted access to this information in accordance with the Interim Measures.
2. Ultimate beneficial owners
A UBO of a Market Player refers to the individual who ultimately owns or actually controls the Market Player or who is the ultimate beneficial owner of the proceeds of the Market Player, including the following individual who:
(a) ultimately owns, directly or indirectly, 25% or more equity interest, shares or partnership interest of a company or a partnership;
(b) exerts actual control over a company or a partnership individually or jointly with others where he or she does not ultimately own, directly or indirectly, 25% or more equity interest, shares or partnership interest of the company or the partnership; or
(c) ultimately enjoys, directly or indirectly, 25% or more of the proceeds of the Market Player.
Actual control in (b) above means to exercise control through agreement, kinship or other ways, such as deciding on the appointment or removal of legal representatives, directors, supervisors or senior management, or managing partners, deciding on the formulation or implementation of major business or management decisions, deciding on financial income and expenditure, and exercising actual control over the utilisation of important assets or major funds on a long-term basis.
If none of the above three situations exist, the persons responsible for the day-to-day management of the company or partnership shall be regarded as the beneficial owners, including the legal representative of the company and the natural person executing and managing the partnership business in the partnership.
3. Scope of disclosure
Market Players will be required to file the following information about their UBOs: (i) name, (ii) gender, (iii) nationality, (iv) date of birth, (v) principal place of business or residential address, (vi) contact information, (vii) information of identity document (e.g. copy of ID card, copy of passport), and (viii) type of beneficial ownership relationship and date of formation of such relationship, as well as the date of termination (if applicable).
In addition, in the case of the situation set out above as paragraph 2(a), the proportion of equity interests or partnership interest held should also be filed. In the case of the situation set out in paragraph 2(b), the manner of actual control should also be filed, and in the case of the situation set out in paragraph 2(c), the proportion of proceeds to be obtained should also be filed.
Market Players should file the UBO information as soon as possible after the completion of their establishment, and will be required to update UBO filings within 30 days of any change of the previously filed UBO information. Competent authorities such as PBOC may require Market Players to further provide supporting materials on equity, control rights, and relevant information about their UBOs.
4. Exemption from filing
For a company or partnership with a registered capital of not more than RMB 10 million and whose shareholders or partners are all natural persons, if there is no natural person other than a shareholder or partner exercising control over it or deriving proceeds from it, or no natural person exercising control over it or deriving proceeds from it in a manner other than through holding equity interests or partnership interests, such company or partnership will be exempted from UBO filings. To avail itself of the exemption, the company or partnership must provide an undertaking that it meets these requirements.
5. Transition period
Companies, partnerships and branch offices of foreign companies registered prior to the commencement of the Interim Measures must file information on their beneficial owners in accordance with the Interim Measures by 1 March 2023.
The Interim Measures indicate China’s ongoing efforts to gear its practices to international standards, and to combat money laundering and other financial violations and crimes. The Market Players and foreign investors who would like to build a presence in China should be cognisant of the requirements under the Interim Measures.