January 28, 2023

Volume XIII, Number 28

Advertisement

January 27, 2023

Subscribe to Latest Legal News and Analysis

January 26, 2023

Subscribe to Latest Legal News and Analysis

January 25, 2023

Subscribe to Latest Legal News and Analysis

Corporate Transparency Act Update: Final Beneficial Owner Reporting Rule

On December 1, 2021, we issued a client alert summarizing the Corporate Transparency Act (CTA), a federal law passed to fight “shell company” money laundering, tax fraud, and other financial crimes. The CTA provides for rules to be promulgated requiring the disclosure of beneficial ownership information of certain entities to the Financial Crimes Enforcement Network (FinCEN). On September 30, 2022, the CTA’s final rule was published (the Final Rule).

With certain exemptions, the Final Rule applies to all corporations, limited liability companies, and other entities that are formed or registered to do business in the United States, whether domestic or foreign (collectively, Reporting Companies). Types of exempted entities under the Final Rule include:

  1. Publicly traded companies

  2. Most financial service, investment, accounting, and banking institutions already licensed by or reporting to agencies like the SEC and FDIC

  3. Tax-exempt entities

  4. Companies that have a physical presence in the United States, more than 20 full-time employees, and report gross receipts of more than $5 million annually

  5. Inactive entities (as defined in the Final Rule)

The Final Rule will take effect on January 1, 2024. Reporting Companies created or registered before January 1, 2024, will have one (1) year, but no later than January 1, 2025, to file their initial reports. Reporting Companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. Once the initial reports have been filed, both existing and new Reporting Companies will have to file updates within 30 days of a change in their beneficial ownership information.

The Final Rule requires that Reporting Companies submit certain information of any “beneficial owner”, which is defined as any individual who, directly or indirectly, either (1) exercises substantial control over the Reporting Company or (2) owns or controls at least 25% of the ownership interests of the Reporting Company. The information to be provided includes full legal name, date of birth, current address, unique identifying number, and issuing jurisdiction from certain approved documents.

A Reporting Company created or registered on or after January 1, 2024, must also submit personal information for any “company applicant” of the entity. For a domestic entity, the company applicant is the individual who directly files the document creating the domestic reporting company. For a foreign entity, the company applicant is the individual who directly files the document first registering the foreign reporting company in the United States. The information provided will not be publicly available, but FinCEN is authorized to disclose the information to certain governmental agencies.

The Final Rule is the first of three rules planned to fully implement the CTA. FinCEN will engage in additional rulemakings to (1) establish rules for who may access beneficial ownership information, for what purposes, and what safeguards will be required to ensure that the information is secured and protected, and (2) revise FinCEN’s customer due diligence rule in light of the CTA.

© Steptoe & Johnson PLLC. All Rights Reserved.National Law Review, Volume XII, Number 343
Advertisement
Advertisement
Advertisement

About this Author

Bryan Prosek, Steptoe Johnson Law Firm, Columbus, Corporate and Finance Law Attorney
Member

Bryan Prosek chairs the firm's securities practice group.  He focuses his practice in the area of business transactions, including securities offerings and federal and state registration compliance, corporate and real estate matters, mergers and acquisitions, contracts, licenses and similar agreements, corporate governance, banking and finance, corporate and partnership tax matters, and non-profit tax-exempt matters.

614-458-9793
John Chadd, Steptoe Johnson Law Firm, Energy Transaction and Mineral Law Attorney
Of Counsel

John Chadd focuses his practice in the areas of energy transactional and mineral title law. He advises companies, investors, and lenders on a broad spectrum of oil and gas and energy transactions including finance, acquisitions and divestitures, development and operational matters as well as general mergers and acquisitions and renewable energy projects.  He also represents companies and lenders in lending and finance transactions across a wide array of industries. 

303-389-4316
Associate

Kalynn Walls' approach to her practice is centered by her drive and client-focused method. She has a business concentrated practice that includes business litigation and regulation, economic development, and higher education.

As a first-generation college and law school graduate, she strives to help not only her clients, but her community. Through her years of volunteer work and community outreach, Kalynn values building relationships and advocacy, while appreciating the perspectives represented on all sides of a case, negotiation or conflict...

502-423-2061
Advertisement
Advertisement
Advertisement