In order to prevent and curb money laundering and terrorist financing activities, the People’s Bank of China and the State Administration for Market Regulation jointly promulgated the Measures for the Administration of Beneficial Ownership Information (the “Measures”) earlier this year, which came into effect on November 1, 2024. As of that date, the relevant entities are required to report beneficial ownership information to the competent authorities.

In line with the implementation of the Measures, the People’s Bank of China and the State Administration for Market Regulation have issued the Guidelines on Beneficial Ownership Information Reporting (First Edition) (the “Guidelines”) recently, and the beneficial ownership information online reporting system has been officially launched.

Beneficial ownership information reporting is a brand new system in China, which is still not well understood by many people, and we are constantly getting inquiries from our clients. We hereby would like to briefly introduce the system as follows, focusing on typical questions and taking into account the Measures and Guidelines as well as the online reporting system.

(1) Which entities required to report beneficial ownership information?

According to the Measures, companies, partnerships and branches of foreign companies are the current “reporting entities”.

(2) What is a beneficial owner and how is it determined?

Beneficial owner means a natural person who ultimately owns or actually controls the reporting entity, or who enjoys the ultimate benefits of the reporting entity.

A natural person who meets one of the following criteria is the beneficial owner of the reporting entity:

Criterion 1: A natural person who, directly or indirectly, ultimately owns more than 25 percent of the equity, shares or partnership interests of the reporting entity.

Criterion 2: A natural person who does not meet Criterion 1 but is ultimately entitled to more than 25 percent of the income and voting power of the reporting entity.

Criterion 3: A natural person who does not meet Criterion 1 but individually or jointly exercises de facto control over the reporting entity.

There may be more than one beneficial owner, and any natural person who meets one of the above three criteria should be reported as a beneficial owner. If the beneficial owner cannot be identified by the above criteria, the person responsible for day-to-day operation and management shall be regarded as the beneficial owner.

(3) Does the resident representative office of a foreign enterprise need to report the beneficial owner?

According to the Measures and Guidelines, a branch of a foreign company is required to report beneficial ownership information, but such branch in this context does not refer to a resident representative office of a foreign enterprise. Feedback from the online reporting system is further evidence that no relevant reporting is required for resident representative offices of foreign enterprises.

(4) What information about the beneficial owner needs to be reported and will such information be made public?

The information of the beneficial owner required to be reported mainly includes: the beneficial owner’s name, gender, nationality, date of birth, address of the usual place of residence or work unit, contact information, type, number and validity period of identification document, and the type of the beneficial ownership relationship, as well as the date of its formation and termination (if any). 

One detail to note is that a Chinese cell phone number should be in place as the contact information for the beneficial owner, as required by the online reporting system.

China has adopted relatively prudent requirements for the security and privacy protection of the information of the beneficial owner, and has made it clear that such information will not to be disclosed to the public.

(5) When to perform the reporting obligation?

According to the Measures, starting from November 1, 2024, the establishment and registration of companies, partnerships and branches of foreign companies shall report beneficiary ownership information through the registration system, while companies, partnerships and branches of foreign companies registered before November 1, 2024 shall complete the supplementary reporting of beneficiary ownership information before November 1, 2025 (it should be noted that some regions require supplementary reporting when such entities apply for change registrations). Subsequent changes in beneficial ownership information should be reported within 30 days from the date of change.

(6) What are the consequences of failing to report according to the relevant regulations?

According to China’s current laws and regulations, if a reporting entity fails to make a reporting properly, the registration authority shall order it to make corrections; if it refuses to do so, a fine of not more than RMB 50,000 shall be imposed. If the People’s Bank of China and its branches find that the beneficial ownership information reported by the reporting entity is inaccurate, they shall order the reporting entity to make corrections within a certain period of time, failing of which, a fine of not more than RMB 50,000 shall be imposed.

In order to ensure that the relevant entities operate in accordance with the law in China, Youly recommends the following: For investors who intend to set up relevant entities, they should consider the reporting of beneficiary ownership information and make corresponding arrangements in the early stage; for companies or partnerships established before November 1, 2024, the relevant entities should prepare for the reporting of beneficiary ownership information, especially to avoid delaying the implementation of relevant projects due to the requirement of the competent authority to synchronize the reporting of beneficial ownership information when applying for changes. If the beneficiary ownership information is sensitive, the relevant enterprises should make arrangements in advance.

Useful tools:

1. click here to see Youly’s service on enterprise formation in China
2. link to Chinese official FDI guide website

China plans to allow the establishment of wholly foreign-owned hospitals in certain cities and regions across the country, according to an official document released yesterday.

These hospitals will be permitted to open in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen and throughout the island of Hainan, according to a circular jointly issued by the Ministry of Commerce, the National Health Commission, and the National Medical Products Administration on further expanding pilot programs for opening up in the medical field.

The circular noted that the conditions, requirements and procedures for establishing these hospitals will be specified later.

Useful tools:

1. click here to see Youly’s service on enterprise formation in China
2. link to Chinese official FDI guide website

Restrictions on foreign investment in the manufacturing sector will be lifted with the release of the 2024 version of the negative list for foreign investment access, China’s top economic planner announced yesterday.

Jointly issued by the National Development and Reform Commission and the Ministry of Commerce, the negative list, effective November 1, reduces the number of restrictions from 31 to 29, achieving zero restrictions on the manufacturing sector.

The release and implementation of the 2024 version of the national negative list is an important step in building a new system of higher-level open economy, an NDRC official said. The NDRC will work with the MOC and other departments and regions to further implement the system of pre-establishment national treatment plus a negative list.

Useful tools:

1. China’s new Negative List (Chinese edition)
2. click here to see Youly’s service on enterprise formation in China
3. link to Chinese official FDI guide website