China’s Ultimate Beneficial Owner (UBO) Filing Requirements: Key Deadline Ahead

The PRC Administrative Measures on Beneficial Owner Information (the “Measures”), jointly issued by the People’s Bank of China (PBOC) and the State Administration for Market Regulation (SAMR), require business entities to proactively submit their ultimate beneficial owner information starting November 1, 2024.

Entities Subject to UBO Filing Obligation and Exemption Criteria

The Measures apply to a wide range of entities. Specifically, all corporations (regardless of whether they have foreign investment), partnerships, and branches of overseas companies (such as foreign bank branches registered with Chinese authorities) established in China are required to report their UBO information. These entities are referred to as “Filing Entities” in the Measures.

Based on the Answers to the Press Questions on the Administrative Measures on Beneficial Ownership Information (the “Answers”) as released by the PBOC on April 30, 2024, those entities currently not subject to such UBO filing requirements include sole proprietorships as well as branch offices of domestic corporations and partnerships. However, this scope could be adjusted in the future, depending on evolving regulatory developments.

Certain Filing Entities may be exempt from the UBO filing obligation if they meet all of the following criteria:

• Registered capital or investment amount not exceeding RMB 10 million (or equivalent foreign currency).
• All shareholders or partners are natural persons.
• No individuals, other than the registered shareholders or partners, exercise control or obtain benefits from the entity.
• No non-equity means of control or benefit.

It is important to note that Filing Entities claiming exemption must still confirm their eligibility and submit a formal commitment to that effect with the competent authorities.

UBO Filing Deadlines for Different Entities

Under the Measures:

• For Filing Entities incorporated before November 1, 2024, the deadline to complete the UBO filing is November 1, 2025.
• For Filing Entities incorporated on or after November 1, 2024, the UBO filing must generally be completed at the time of establishment registration through the relevant corporate registration system. Depending on local policies, these entities may alternatively file the UBO information onsite within 30 days of establishment.

Who is considered a UBO?

Article 15 of the Measures defines the beneficial owner as a natural person who ultimately owns, controls, or derives benefits from a Filing Entity. According to Article 6 of the Measures, a natural person is identified as the UBO of a Filing Entity if any of the following criteria is met:

• Criterion 1: A natural person directly or indirectly holds 25% or more of the equity interest, shares or partnership interests in the Filing Entity,
• Criterion 2: A natural person who does not meet Criterion 1, but ultimately holds 25% or more of the income rights or voting rights of the Filing Entity, or
• Criterion 3: A natural person who does not meet Criterion 1, but exercises actual control, either individually or jointly, over the Filing Entity.

It is worth mentioning that under the Measures, actual control over an entity does not necessarily have to be based on equity or partnership interests. It may also be exercised through other means, such as proxy arrangements, contractual agreements, or close personal relationships.

The Measures further clarify three potential forms of actual control:

• Control over Personnel: This refers to having decision-making power over the appointment or dismissal of the legal representative, directors, supervisors, senior officers, or managing partners of the entity.
• Control over Corporate Decisions: This refers to having the power to make key decisions related to the formulation and implementation of important business or management strategies of the entity.
• Control over Assets: This refers to having the power to decide on financial receipts and expenditures, and the long-term management and use of important assets or major funds of the entity.

Last but not least, different from the so-called “actual controller”, there may be more than one UBO of a Filing Entity. It is therefore essential to consider all three criteria when identifying UBOs, and to report every individual who meets any of these criteria as a beneficial owner of the Filing Entity.

Required Information for each UBO

• Name, gender, nationality, date of birth
• Address of residence or workplace, contact details
• Type of ID, identification number, and validity period of the identification document
• Type of the beneficial ownership, date of formation and termination (if applicable)
• Percentage of equity, shares, or partnership interests held, or the percentage of income rights, voting rights, or type of other methods of actual control

Consequences of Violating UBO Filing Requirements

Failure to timely/accurately submit UBO information may result in fines of up to RMB 50,000 if the Filing Entity does not rectify the issue after being ordered by the authorities.