BOI Filing in China Q&A (III): How to Decide the Beneficiary Owner?

Posted by Written by Qian Zhou Reading Time: 9 minutes

China’s new beneficiary owner information (BOI) filing measures require business entities, except individually owned businesses, to submit their beneficiary owner information starting November 1, 2024. To assist businesses in understanding the new compliance requirements, we have created a Beneficiary Owner Filing in China Q&A series, focusing on specific questions regarding the BOI filing requirements. This is issue III of the series.

On April 1, 2024, the People’s Bank of China (PBOC), in collaboration with the State Administration for Market Regulation (SAMR), issued the Measures for the Administration of Beneficial Ownership Information (hereinafter referred to as “the Measures”). These regulations officially came into effect on November 1, 2024.

Under the new requirements, all companies, partnerships, and branches of foreign companies established in China must report their beneficial ownership information at the time of registration via the relevant corporate registration system. Entities already registered before November 1, 2024, must complete their filings by November 1, 2025.

To provide further clarity, on October 28, 2024, the Anti-Money Laundering Bureau of the PBOC released the Guidelines for Beneficial Ownership Information Reporting (First Edition) (“the Guidelines”). In Q&A format, this document addresses common questions and clarifies key reporting requirements.

To help businesses navigate these new compliance obligations, we are launching a Beneficiary Owner Filing in China Q&A Series. Each issue will tackle a specific aspect of the filing requirements.

In this third issue, we explain: How to decide the beneficiary owner for different businesses, based on their ownership, structure, and other situations. Stay tuned as we break down the key compliance criteria and what businesses need to know.

Q1: What are China’s standards for determining a beneficiary owner?

According to Article 6 of the Administrative Measures for Beneficial Owner Information Reporting (“the Measures”), a natural person must meet one of the following three criteria to be identified as the beneficiary owner of a filing entity:

  • Criterion 1: A natural person who directly or indirectly holds more than 25 percent of the equity, shares, or partnership interests in the filing entity.
  • Criterion 2: A natural person who does not meet Criterion 1, but ultimately enjoys more than 25 percent of the filing entity’s beneficial rights (such as dividends or economic interests) or voting rights.
  • Criterion 3: A natural person who does not meet Criterion 1, but exercises actual control, either alone or jointly, over the filing entity.

To be noted, Criteria 2 and 3 apply only when Criterion 1 is not met. For example, if Individual A holds 75 percent of the equity in Company A and enjoys 75 percent of its economic benefits, they are considered the beneficiary owner under Criterion 1—not Criteria 2 or 3.

Q2: How do I determine the beneficiary owner under Criterion 1?

Criterion 1 identifies the beneficiary owner based on equity ownership. A natural person qualifies if they directly or indirectly hold more than 25 percent of the equity, shares, or partnership interests in the filing entity.

There are two ways this ownership can be structured:

  • Direct ownership: The natural person holds over 25 percent equity or partnership interest in their own name.
  • Indirect ownership: The natural person holds more than 25 percent equity through multiple layers of ownership, such as via one or more holding companies.

To assess indirect ownership, you must trace the ownership chain layer by layer until you identify the natural persons who ultimately hold more than 25 percent of the equity. Once identified, they are the beneficiary owners for filing purposes.

Example 1 (Direct ownership):
Company A has three individual shareholders—Person X (55 percent), Person Y (20 percent), and Person Z (25 percent). Since Person X and Person Z each hold at least 25 percent directly, both X and Z are beneficiary owners under Criterion 1.

Example 2 (Indirect ownership):
Company A has two shareholders—Person X (30 percent) and Company B (70 percent). Company B, in turn, is owned by: Person Y (30 percent), Person Z (20 percent), and Company C (50 percent). Company C is jointly owned by Person Z (50 percent) and Person W (50 percent).

Calculated indirect ownership in Company A:

  • Person Y indirectly owns 21 percent (30 percent of B × 70 percent of A).
  • Person Z indirectly owns 31.5 percent (50 percent of 50 percent of C × 70 percent of A + 20 percent of B × 70 percent of A).
  • Person W indirectly owns 17.5 percent.
  • Person X directly owns 30 percent.

Therefore, Person X and Person Z are beneficiary owners, as they each own more than 25 percent, either directly or indirectly.

Q3: How do I determine the beneficiary owner under Criterion 2?

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Criterion 2 identifies the beneficiary owner based on substantial economic or voting rights, even if the person does not meet Criterion 1. A natural person qualifies if they ultimately enjoy more than 25 percent of the economic interests or voting rights in the filing entity. Economic rights refer to entitlements such as dividends, distributions, or share value appreciation. These rights can be assigned separately from equity ownership.

In practice, this often arises when ownership and benefits are separated. A person may not be a shareholder or partner, but still qualify under Criterion 2 through arrangements such as:

  • Nominee or proxy shareholding
  • Trust or contractual agreements
  • Transfers of dividend or profit rights

To determine beneficiary ownership under Criterion 2, companies must look beyond formal ownership and assess who ultimately benefits from or controls 25 percent or more of the entity’s value or decisions.

Example 3 (Transfer of economic rights):
Company A has two shareholders: Person A (30 percent) and Person B (70 percent). Through a contractual agreement, Person A transfers the economic rights of their 30 percent equity to Person C.

  • Person A and Person B qualify under Criterion 1 due to direct ownership.
  • Person C, although not a shareholder, enjoys more than 25 percent of the company’s economic rights, and therefore qualifies as a beneficiary owner under Criterion 2.

Therefore, Persons A, B, and C must all be registered as beneficiary owners.

Example 4 (Aggregated economic rights):
Person D owns 10 percent of Company B’s shares, along with the economic rights attached. By agreement, D also acquires the economic rights of another 20 percent equity from other shareholders.

  • D’s direct ownership does not meet Criterion 1.
  • But D now enjoys a total of 30 percent of the company’s economic rights.

Therefore, Person D qualifies as a beneficiary owner under Criterion 2 and must be disclosed.

In short, under Criterion 2, beneficiary ownership is determined by examining who ultimately controls or benefits from a significant portion of the company’s profits or voting power, regardless of their formal ownership status.

Q4: How do I determine the beneficiary owner under Criterion 3?

Criterion 3 identifies a beneficiary owner based on actual control. A natural person qualifies even if they do not meet Criterion 1 (ownership) or Criterion 2 (economic rights), as long as they exercise control—alone or jointly—over the filing entity’s key decisions, assets, or personnel.

Actual control can arise from:

  • Voting agreements
  • Special contractual rights
  • Influence through close personal relationships (e.g., family, long-term associates)

Control includes the ability to:

  • Appoint or remove legal representatives, directors, supervisors, or senior executives
  • Determine or execute major business or financial decisions
  • Use or direct the use of major assets or funds over the long term

In some cases, the individual may not own any shares but is still considered a beneficiary owner due to their control over operations, personnel, or finances.

Example 5 (Control through voting agreements):
Company A has a dispersed ownership structure. Person X holds only five percent equity, but enters into a voting agreement with several other shareholders who commit to voting in alignment with X. As a result, X effectively controls board appointments and key business decisions.
Therefore, Person X qualifies as a beneficiary owner under Criterion 3.

Example 6 (Control through influence):
Person Y is a founder of Company A and holds only three percent equity after several financing rounds. However, Y still influences the appointment of senior management and the company’s strategic direction.
Therefore, Person Y exercises actual control and qualifies as a beneficiary owner under Criterion 3.

Example 7 (Control through family ties):
Person Z owns no shares in Company A. The equity is held by Person X (70 percent) and Person Y (30 percent). Person X is Z’s mother and acts on Z’s instructions. Z uses this relationship to control appointments and major decisions.
Therefore, X and Y are beneficiary owners under Criterion 1, while Z is also a beneficiary owner under Criterion 3.

In short, even without legal ownership or economic rights, a natural person who can effectively steer the company’s direction must be identified and reported as a beneficiary owner.

Q5: How do I determine the beneficiary owner under both Criterion 2 and Criterion 3?

A natural person may simultaneously qualify under both Criterion 2 (economic or voting rights) and Criterion 3 (actual control), particularly where voting rights are separated from equity ownership but used to exert control over the filing entity. In such cases, the person should be recorded as a beneficiary owner under both criteria.

There are two key conditions:

  • The person ultimately enjoys more than 25 percent of the voting rights, even without holding equity directly.
  • The person uses those rights to control key aspects of the company, such as appointments, strategic decisions, or financial operations.

Example 8 (Voting rights via agreement):
Person X is not a shareholder of Company A, but enters into agreements with several shareholders requiring them to vote in accordance with X’s instructions. This gives X de facto control over 51 percent of the voting rights in Company A.
As a result, X:

  • Qualifies under Criterion 2 (ultimate enjoyment of over 25 percent voting rights), and
  • Qualifies under Criterion 3 (actual control over company operations and personnel decisions).

Therefore, Person X must be filed as a beneficiary owner under both Criterion 2 and Criterion 3.

Example 9 (Beneficial ownership with proxy control):
Company A has two shareholders: Person Y (70 percent) and Person Z (30 percent). Person Y has signed an agreement with Person X (a non-shareholder), giving X the economic and voting rights associated with Y’s 70 percent stake. Y is thus a nominee holder, and X is the actual beneficiary.
In this case:

  • Person Y and Person Z are beneficiary owners under Criterion 1 (direct equity ownership).
  • Person X qualifies under Criterion 2 (enjoying 70 percent economic and voting rights) and Criterion 3 (control over decision-making via voting rights).

Therefore, all three individuals—X, Y, and Z—should be recorded as beneficiary owners, with Person X being noted under both Criterion 2 and Criterion 3.

Q6: How do I determine the beneficiary owner for partnerships?

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Partnerships follow similar principles to companies when determining beneficiary ownership. The key is to examine partnership interests, partnership agreements, and any control rights related to personnel, management, or financial matters. Beneficiary owners are identified based on the same three criteria.

In particular, general partners in limited partnerships (LPs) may be considered beneficiary owners even if their capital contribution is minimal. Under China’s Partnership Enterprise Law, general partners are responsible for executing partnership affairs and often hold significant management authority. If a general partner exercises actual control, they qualify under Criterion 3 and must be disclosed as a beneficiary owner.

Example 10 (General partner with actual control in an LP):
Limited Partnership A consists of one general partner—Person X—and many limited partners. The limited partners have small, dispersed stakes and play no role in business operations or decisions.
Although Person X holds only one percent partnership interest, X manages day-to-day operations and has authority over financial, personnel, and investment decisions.
Thus, Person X:

  • Exercises actual control over the partnership;
  • Meets the requirements under Criterion 3; and
  • Must be recorded as the beneficiary owner of the partnership.

Q7: How do I determine the beneficiary owner for a foreign company’s branch in China?

Foreign company branches registered in China are required to file beneficiary owner information. When identifying beneficiary owners for a foreign branch, the following two elements must be considered:

  • Upstream ownership: The branch must file the beneficiary owners of the foreign parent company in accordance with Article 6 of the Measures and Section 3 of the Guidelines. This involves identifying individuals who meet any of the three standard criteria (ownership, economic rights, or actual control) over the parent entity.
  • Local control: In addition to the foreign parent’s BOs, the branch must designate at least one top-level senior manager of the branch as a BO—typically the chief representative or branch head, as they are the highest-ranking individuals managing the branch’s operations in China.

Foreign companies and their branches cannot claim exemption from beneficiary owner disclosure. Any exemption or simplified beneficiary owner filing standards the parent may enjoy in its home jurisdiction do not apply in China.

Q8: What should I pay attention to when identifying beneficiary owners?

When identifying beneficiary owners, the following rules should be carefully followed:

  • There may be more than one beneficiary owner: A reporting entity may have multiple beneficiary owners. Do not rely solely on Criterion 1 (ownership threshold). You must assess all three criteria. If multiple individuals meet any of these criteria, all should be reported as beneficiary owners.
  • Prioritize Criterion 1 if already met: If a natural person meets Criterion 1, they should be registered as a beneficiary owner under that criterion only. There is no need further to assess Criteria 2 or 3 for that person.
  • Report dual compliance with Criteria 2 and 3: If a natural person meets both Criteria 2 and 3, this dual basis must be clearly reflected when reporting. The individual should be recorded as a beneficiary owner under both criteria.

Q9: What if no individual meets any of the three beneficiary owner criteria?

If no natural person satisfies Criterion 1 (ownership), Criterion 2 (economic benefit), or Criterion 3 (control), the entity must designate at least one individual who is responsible for day-to-day management as the beneficiary owner.

This person should be the highest-level individual involved in daily operations, such as:

  • The legal representative;
  • The chairperson of the board;
  • A director or general manager; or
  • In the case of a partnership, the individual responsible for executing partnership affairs (e.g., general partner or a natural person acting on their behalf)

This ensures that there is always a clearly designated beneficiary owner, even in complex or highly dispersed ownership structures.

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Dezan Shira & Associates assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Haikou, Zhongshan, Shenzhen, and Hong Kong. We also have offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Dubai (UAE) and partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh, and Australia. For assistance in China, please contact the firm at china@dezshira.com or visit our website at www.dezshira.com.