How to Check Chinese Company Shareholder Background and Actual Controller?
Question
I was discussing cooperation with a Zhejiang machinery factory. The other party said that the boss was from a large state-owned enterprise and the company was very strong. I want to verify the shareholder structure and actual controller of this company, but the equity of China companies feels very complicated, with proxy holding and nesting, and I don't know where to start.
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This question is typical. When many overseas buyers see that China companies promote the "background of state-owned enterprises,""shareholders of listed companies" are relieved. In fact, there are too many cases where the equity structure is stacked one after another.
When we did verification, the first step was to start with the China National Enterprise Credit Information Disclosure System to find out the shareholder information of this company. But what the system often shows is only the first-level shareholders, that is, the person or company who directly holds the shares. If the first-level shareholder is a partnership or investment company, you will have to continue to look down to see who the ultimate beneficiary will be after penetration. This is called actual controller traceability.
Judging from the cases we have dealt with, there is a common operation: on the surface, the shareholders are two natural persons, Zhang San and Li Si, which seem to have nothing to do with the advertised "state-owned enterprise background", but if you look up a higher level, you find that this company is actually controlled by a completely different privately held group. There is also a situation where the nominal shareholder and the person who actually paid the money are not the same person, which is difficult to confirm from public channels. In practical terms, I suggest you pay attention to several points. Be careful to see if shareholders change frequently and change shareholders three times within half a year; second, if there are other affiliated companies under the name of the shareholder. If there are more than a dozen small companies with completely different business scopes under the name of the same boss, this kind of intersection often suggests that funds are mixed or shell companies are suspected. Third, see if there are any records of those who have been subjected to breach of trust or shareholders who have been restricted from spending high. These can be checked on the China Enforcement Information Disclosure website. If these investigations are troublesome, CheckChinaCompany's platform report will make a layer of equity penetration chart to mark out the ultimate beneficiary, but will also indicate the limitations of penetration depth. For example, some shares held through offshore structures, domestic public data will be broken when it reaches the VIE level. So in the end, equity verification can help you eliminate obvious risks, but there is no guarantee that what you will see is the whole truth.
People Also Ask
Are actual controllers and controlling shareholders the same thing?
It's not the same thing. These two are often confused. The controlling shareholder is a shareholder with a high shareholding ratio and can make the final say, while the actual controller is a person who may not necessarily hold shares but can truly control the company through agreements or arrangements. For example, if someone holds shares on behalf of others, the registered shareholder is him, but the one who really makes the decision behind it is the actual controller. The simple understanding is: the controlling shareholder looks at "equity" and the actual controller looks at "voice."
How to find out which companies are owned by a China person?
China's industrial and commercial system generally does not support direct reverse search by person's name, but CheckChinaCompany can provide this service. Contact CheckChinaCompany's official customer service to provide the person's name to be searched. Within normal 12 hours, an inquiry report will be provided, which will show the company under his name, the company where he holds senior management, and the foreign investment. However, it is easy to bump into duplicate names based on names alone. It is best to add the name of the region and one of the companies to narrow the scope. If you are the actual controller of a listed company, you can simply review the annual report directly, and the information is mandatory to disclose.
Where can a listed company in China find out the actual controller information?
The actual controller of a listed company is subject to mandatory disclosure and can be found on the official website of the Shanghai Stock Exchange of China or the Shenzhen Stock Exchange. Opening the annual report and turning to the "Corporate Governance" or "Shareholder Changes" section will clearly state who the actual controller is and what path to control the company. It is also found in the prospectus and major event announcements, which is much easier than checking unlisted companies.