Definition of Beneficial Owner

A beneficial owner is defined as any natural person who ultimately owns or controls more than 25% of the equity, income, or voting rights of the entity, either directly or indirectly. This includes those with significant influence over the entity’s operations, financial decisions, or the use of key assets.

Scope and Applicability

The new measures mandate that a wide range of entities must file detailed beneficial owner information. These entities include:

• Companies: Both domestic and foreign companies operating in China.
• Partnerships: Business partnerships established within China.
• Branches of Foreign Companies: Foreign companies operating through branches in China.
• Other Entities: Any other entities as specified by the PBOC and the State Administration for Market Regulation (SAMR).

Exemptions: Individually-owned businesses and entities that meet specific criteria—such as a registered capital under RMB 10 million with all shareholders being natural persons—may be exempt from filing requirements if no other natural person exercises control or derives benefits.

Data Filing and Management

Entities covered by the regulation are required to file beneficial owner information through a relevant registration system at the time of establishment. If the registration system is not accessible, entities can file on-site but must update the system within 30 days. Any changes in beneficial ownership must also be reported within 30 days.

The PBOC will establish and manage the beneficial owner information system, ensuring accurate, timely collection and maintenance of data. This system is crucial for monitoring financial activities and ensuring that all beneficial ownership is transparent and traceable.

Compliance and Enforcement

The PBOC and SAMR are tasked with ensuring that entities comply with the filing requirements. Non-compliance, such as failure to file or submitting inaccurate information, can lead to penalties. The PBOC can impose fines up to RMB 50,000 and require corrective actions within a specified timeframe.

Aim

These regulations, endorsed by the State Council, aim to significantly enhance market transparency, ensure financial order, and combat illegal financial activities such as money laundering and terrorist financing. Below, we explore the key aspects and implications of this regulation in greater detail.

Confidentiality and Data Sharing

Beneficial owner information is strictly confidential. It can only be accessed by state organs, financial institutions, and specified non-financial institutions for the purpose of fulfilling anti-money laundering (AML) and counter-terrorism financing (CTF) obligations. These institutions are also responsible for maintaining the confidentiality of the data they access.

Implications for Businesses

These new measures signal a significant shift in China’s approach to corporate governance and transparency. Businesses will need to ensure that they have robust systems in place to comply with these new requirements. The regulation underscores the importance of transparency in ownership structures, aiming to foster a more secure and stable financial environment in China.

Timeline for Implementation

Entities that have been registered before the implementation date are required to comply with the new filing requirements by November 1, 2025. This phased approach gives businesses adequate time to prepare and adapt to the new regulatory landscape.

Conclusion

The “Measures for the Management of Beneficial Owner Information” represent a critical step in China’s ongoing efforts to tighten financial regulation and enhance market transparency. Businesses operating in China should prepare for these changes, ensuring compliance to avoid penalties and contribute to a more transparent market environment. The success of these measures will depend on the cooperation between regulatory bodies and businesses, as well as the effectiveness of the PBOC’s information management system.

For businesses, this regulatory change highlights the growing importance of transparency and accountability in corporate governance. Adhering to these new rules will not only ensure compliance but also strengthen the integrity and reputation of businesses within China’s financial markets.