The Financial Crimes Enforcement Network of the Department of the Treasury (FinCEN) issued final regulations under the Corporate Transparency Act (CTA) which, effective January 1, 2024, require most companies (i.e., corporations, limited liability companies or other similar entities) formed or registered to do business in the United States to disclose certain “beneficial ownership information” (BOI). These regulations apply to foreign companies that are registered to do business in the United States and companies formed in the United States (whether or not they are formed or controlled by a foreign individual or company).
The CTA was enacted to counter, among other things, money laundering and financing of illegal activity by making it more difficult for bad actors to conceal their ownership of companies doing business in the United Sates.
Reporting Companies
As a general rule, every corporation, limited liability company, or other similar entity that is (a) created under the law of a United States state or territory or Indian tribe or (b) formed under the laws of a foreign country and registered to do business in the United States is subject to the reporting requirements of the CTA (a “reporting company”).
Despite the broad definition of reporting company, a number of entities are exempt from this definition, including entities that are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, Investment Company Act of 1940 or Investment Advisers Act of 1940 (such exemptions do not apply more broadly to entities registered with a foreign stock exchange, such as the Tokyo Stock Exchange). Further, any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities exempt from the definition of “reporting company”[1] is also exempt from the BOI reporting requirements.
Filing Information
Initial BOI reports filed with FinCEN must include the (a) full legal name, (b) date of birth, (c) current address, and (d) unique identifying number from an acceptable identification document or FinCEN identifier of each of its beneficial owners and applicants.
What is a beneficial owner? A “beneficial owner” is any individual who, directly or indirectly, (a) exercises substantial control over the reporting company or (b) owns or controls 25% or more of the ownership interests of the reporting company. An individual has “substantial control” over a reporting company if, among other things, they serve as a senior officer of the reporting company or have authority over the appointment or removal of any senior officer or a majority of the board of directors of the reporting company.
What is an applicant? An “applicant” is (a) (i) for a domestic reporting company, the individual who directly files the document that creates the domestic reporting company or (ii) for a foreign reporting company, the individual who files the document that registers the foreign reporting company to do business in the United States and (b) whether for a domestic or foreign reporting company, the individual who is primarily responsible for directing or controlling such filing if more than one individual is involved in the filing of the document. This definition generally limits the definition of “applicant” to one or two individuals. In one example provided in the final regulations, in which a reporting company employs a law firm to assist with incorporation, both the attorney primarily responsible for overseeing the preparation and filing of the incorporation documents and the paralegal who directly files them with a state office would be considered “applicants” of such reporting company.
While FinCEN may share BOI under certain circumstances related to the purposes of the CTA, BOI reports are not generally available to the public. Under the Access Rule, the disclosure of BOI by FinCEN is limited to certain agencies that support the purposes of the CTA, such as national security, intelligence, or law enforcement agencies or financial institutions who use BOI to comply with customer due diligence requirements.
Reporting Deadlines
Because the final regulations became effective on January 1, 2024, initial reporting deadlines depend on when the reporting company was formed. Reporting companies may also be required to file updated reports under various circumstances, including changes with respect to its beneficial owners or information reported for any particular beneficial owner, or to correct information that was inaccurate when filed.
| Date of Formation of Reporting Company | Initial Report Deadline |
| Before January 1, 2024 | One year from the effective date of the final regulations (i.e., January 1, 2025) |
| On or after January 1, 2024, and before January 1, 2025 | Within ninety (90) calendar days of receiving notice of formation. |
| On or after January 1, 2025 | Within thirty (30) calendar days of the receiving notice of formation. |
Next Steps
It is unlawful for any person to willfully provide, or attempt to provide, false or fraudulent BOI to FinCEN, or to willfully fail to report complete or updated BOI. Therefore, foreign companies (and subsidiaries of foreign companies) doing business in the United States should carefully review the BOI reporting requirements and consider whether their existing or any anticipated ownership interests in companies formed in the United States or registered to do business in the United States trigger a reporting requirement under the CTA.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
Footnotes
[1] Subsidiaries of (a) a money services business, (b) a pooled investment vehicle, (c) an entity assisting a tax-exempt entity, or (d) an inactive entity, are not exempt from the BOI reporting requirements under this exemption.
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