Update on the Corporate Transparency Act – Beneficial Ownership Information Report
Background
We previously posted articles and email updates regarding the Corporate Transparency Act that took effect on 1 January 2024 (the “CTA”). The defined purpose of the CTA is ‘to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures’. To that end, the Financial Crimes Enforcement Network (FinCEN), a part of the United States Treasury, passed the Beneficial Ownership Information Reporting rules pursuant to the CTA that require most entities registered in the United States to file information related to their beneficial ownership (the “BOIR”). Though there are some exemptions, they may not apply to most of our clients. If you would like to know more about the exemptions, please refer to this link.
Compliance and Filing
TABS Inc. is reaching out to its Governance / Corporate Secretary Clients to gather information and make filings. If your company was formed in 2024, your BOIR is due within 30 days of your date of formation. If your company was formed prior to 1 January 2024, your BOIR is due on or before the last day of 2024 (i.e., 31 December 2024).
The report will contain information related to Beneficial Owner’s including their name, residential address, date of birth and a copy of an unexpired passport (for foreign reporters – domestic may provide another governmental form of ID).
We will send a request for information to a designated person on your team. Simply complete the form and provide the required documentation, and TABS will handle the filing from there. If you don’t have our corporate governance service but would like our assistance in filing the report, please contact us at Governance@TABSInc.com.
Additional Information
Beneficial Owner Definition
This is a bit of a misnomer in the sense that you do not need to have any ownership interest in the entity in order to be considered a Beneficial Owner. The CTA and FinCEN have defined a Beneficial Owner as:
An individual who either directly or indirectly:
- Exercises substantial control over the company;
- Owns or controls at least 25 percent of the company.
Obviously, No. 1. above requires that we dig deeper to determine what is substantial control. Here, FinCEN has provided the following guidance:
An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:
- The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer who performs a similar function).
- The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
- The individual is an important decision-maker for the reporting company. Such decisions might include decisions about the business, finances, and structure of the Company.
- The individual has any other form of substantial control over the reporting company.
At the very least, from the above, we know that any named director, President, and Treasurer will need to be included on the BOIR. Additionally, any director driver or bestuurder of the shareholder would also likely have substantial control as they have the authority to appoint or remove directors and officers.
Ongoing Obligations
After the initial BOIR has been filed, any changes to the information included in that report will need to be updated within thirty (30) days of the change taking effect. This means that if a Beneficial Owner changes, that will need to be reported. Additionally, if a reported Beneficial Owner changes their residential address or updates their passport, an updated BOIR will be required to be filed with the updated information. It will be your responsibility to update TABS in the event that any such change occurs.
FinCEN Updates
FinCEN has recently published guidance to indicate that even if your entity was dissolved in 2024, an obligation exists to file a BOIR for your dissolved entity. In its FAQ’s, FinCEN provided the following statement in July:
If a reporting company (see Question C.1) continued to exist as a legal entity for any period of time on or after January 1, 2024 (i.e., did not entirely complete the process of formally and irrevocably dissolving before January 1, 2024), then it is required to report its beneficial ownership information to FinCEN, even if the company had wound up its affairs and ceased conducting business before January 1, 2024.
If you wish to make any changes to the officers and directors of your company prior to reporting, please reach out to us.
Stay Compliant, Stay Safe!