FinCEN Issues Final Rule On Beneficial Ownership Reports Under CTA: Businesses Must Begin Preparations To Disclose Beneficial Ownership Information

• Published date: 04 October 2022
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Financial Services, Corporate and Company Law, Corporate Governance, Contracts and Commercial Law
• Law Firm: Taylor English Duma
• Author: Jonathan Wilson

On December 11, 2020, as part of the National Defense Authorization Act for 2021, the U.S. Senate passed the Corporate Transparency Act (CTA). The bill was vetoed by President Trump but bipartisan supermajorities in both houses of Congress overrode that veto and the bill became law.

In December 2021, the Financial Crimes Enforcement Network (or "FinCEN") of the U.S. Treasury Department issued a preliminary draft of regulations (the "Preliminary Rule") that would implement the beneficial ownership reporting requirements of the CTA.¹ On September 30, 2022, FinCEN issued its final rule (the "Final Rule"), indicating that the new reporting requirements would take effect on January 1, 2024.²

The CTA requires most companies doing business in the U.S. to file a beneficial ownership report with FinCEN that discloses specific items of personally identifiable information ("PII") with respect to each beneficial owner of the company. This Client Alert summarizes FinCEN's Final Rule that governs (a) who must file, (b) what must be included in the filing, and (c) when the filing must take place.

The CTA provides that the information FinCEN collects will not be available to the public. Instead, FinCEN will maintain a database of beneficial ownership data that it will make available to law enforcement. FinCEN's provision of that data to law enforcement will be outlined in a future FinCEN rulemaking.

WHICH COMPANIES ARE REQUIRED TO COMPLY?

The CTA applies to each "reporting company," which may be either a "domestic reporting company" or a "foreign reporting company.

A "domestic reporting company" is any entity that is either (a) a corporation, (b) a limited liability company, or (c) created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe."³

A "foreign reporting company" is any entity that is (a) a corporation, limited liability company, or other entity, (b) formed under the law of a foreign country, and (c) registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe."⁴

The Final Rule exempts from the definition of "reporting company" twenty-three separate categories of entities that are highly regulated and whose beneficial ownership is already a matter of public record.⁵ The twenty-three exemption categories are generally unchanged from the exemption categories outlined in the Preliminary Rule.

WHAT MUST BE REPORTED?

If a reporting company must file a beneficial ownership report, the contents of the report will depend on whether the reporting company "was created or registered before January 1, 2024."⁶

Reporting companies created or registered before the effective date of the Final Rule (January 1, 2024) will not be required to report information regarding their company applicant. Reporting companies created or registered after the effective date of the Final Rule will be required to report information regarding their company applicant. This is a significant change from the Preliminary Rule, which had contemplated that all reporting companies would report on their company applicants.

The initial report filed by a reporting company must include:⁷

1. For the reporting company:
2. 1. The full legal name of the reporting company;
   2. Any trade name or "doing business as" name of the reporting company;
   3. A complete current address consisting of:
   4. 1. In the case of a reporting company with a principal place of business in the United States, the street address of such principal place of...