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Actual Controller Disclosure Requirement for China FIEs

Answer
Q:
Is it compulsory to disclose the ultimate actual controller when applying for the establishment of a foreign invested enterprise in China?
A: Yes. It is compulsory to report and disclose the ultimate actual controller when applying for the establishment of a foreign invested enterprise in China.

Q:
Does the ultimate controller have to be traced to a nature person?
A:
Generally, the ultimate controller must be traced to a nature person unless the investor is a listed company, government or public institution, state-owned or collective enterprise.

Q:
How the actual control operates?
A:
The ways of actual control include:
1.
directly or indirectly holding 50% or more of the shares, equity, property shares, voting rights or similar rights and interests in the enterprise.
2. directly or indirectly holding less than 50% of the shares, equity, property shares, voting rights or similar rights and interests in the enterprise, but:
(1).
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;
(2). 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
(3). 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.
3. having a decisive influence on the enterprise’s transactions, finance, personnel and technology, through contracts, trust or in other ways.

Q:
What will happen if the ultimate actual controller is not disclosed?
A:
The foreign invested enterprise will not be established if the ultimate actual controller has not been disclosed.

Q:
What should be done if there is a change for the ultimate actual controller?
A:
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.

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