Actual Controller Disclosure Requirement for China FIEs
In accordance with the Foreign Investment Information Reporting Measures of the PRC, China foreign invested enterprises (FIEs) are required to report and disclose their ultimate actual controllers (also known as ultimate beneficiary) to the Ministry of Commerce of the PRC and local commerce bureaus under the penetration principle.
When a foreign investor establishes a foreign invested enterprise in China, it shall disclose the basic information of its ultimate actual controller in the initial foreign investment report, including but not limited to the name, country/nationality, type of identity, identity number, nature, way of actual control of the ultimate actual controller. The foreign invested enterprise shall submit an amendment report to the local competent commerce bureau within 20 working days after the change of the ultimate actual controller occurs. Besides, the foreign invested enterprise is also required to file the basic information of its ultimate actual controller in the annual report.
- Nature of Ultimate Actual Controller
The nature of ultimate actual controller of a foreign invested enterprise shall be selected from the following seven options:
(1) foreign listed company
(2) foreign natural person
(3) foreign government agency (including funds controlled by government)
(4) international organization
(5) Chinese domestic listed company
(6) Chinese domestic natural person
(7) Chinese state-owned enterprise or collective enterprise
This means that if the investor is not a listed company, government or public institution, state-owned or collective enterprise, it shall be traced to a natural person.
- Ways of Actual Control
A foreign invested enterprise is required to identify the way of actual control when it reports and disclose its ultimate actual controller. The options for the way of actual control to be selected include:
(1)
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directly or indirectly holding 50% or more of the shares, equity, property shares, voting rights or similar rights and interests in the enterprise.
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(2)
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directly or indirectly holding less than 50% of the shares, equity, property shares, voting rights or similar rights and interests in the enterprise, but:
- is entitled directly or indirectly to appoint at least half of the members of the enterprise’s board of directors or similar decision- making body;
- can ensure that its nominated people can obtain at least half of the seats on the enterprise’s board of directors or similar decision- making body; or
- the voting rights are enough to have a material impact on the resolutions of the enterprise’s shareholders meetings, general meetings, board of directors or similar decision-making bodies.
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(3)
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having a decisive influence on the enterprise’s transactions, finance, personnel and technology, through contracts, trust or in other ways.
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