The Final Rule implementing Section 6403 of the Corporate Transparency Act (the CTA) was issued on September 30, 2022. The CTA is a sweeping, new regulation that will affect millions of companies, both domestic and foreign. The objective of the law is to require companies to reveal their beneficial ownership in order to assist the U.S. government in its efforts to identify bad actors, both foreign and domestic, who use the anonymity provided by various company structures in furtherance of their lawless activities. It is important that companies, their owners, and their senior management, be aware of the law and its requirements, which can be both complicated and difficult to navigate.

There is a good chance that anyone reading this will be affected by the implementation of CTA and, consequently, should understand it and be prepared to comply with it based on each situation. Effective this New Year, January 1, 2024, entities created through the filing of a document with a state government, and foreign entities registering to do business in the United States through the filing of a document with a state government, are required to submit company information, beneficial owner information and company applicant information to the Financial Crimes Enforcement Network (FinCEN).

Entities formed on January 1, 2024, or later will have 30 days from creation or qualification to submit such information. On September 28, 2023, however, FinCEN issued a request for comment on a proposal to extend the 30-day time period to 90 days for the submission of information for such companies. Should such proposal be finalized, the extension will only apply through 2024 with the 30-day time period to be reinstated as of January 1, 2025.

This is only a proposal at this time and until implemented such entities should proceed with the 30-day timeframe in mind. The 30-day time period will be triggered "by the earlier of the date on which the reporting company receives actual notice that its creation (or registration) has become effective or a secretary of state or similar office first provides public notice, such as through a publicly accessible registry, that the domestic reporting company has been created or the foreign reporting company has been registered."

Entities formed before January 1, 2024, will have until January 1, 2025, to submit company information and beneficial owner information, but will not be required to submit company applicant information. Companies are expected to submit their filings via a secure, online platform administered by FinCEN called the Beneficial Ownership Secure System or BOSS.

The Regulations, however, exempt 23 types of entities from being deemed a reporting company. These exempted entities tend to be larger or more heavily regulated entities. Reporting companies must file specified information on each of the company's beneficial owners with the understanding that a "beneficial owner" is any individual who exercises substantial control over the reporting company or owns or controls at least 25 percent of the ownership interest of the reporting company. The information to be reported includes the following:

(i)Full legal name;(ii)Date of birth;(iii)Current residential address; and(iv)A unique identifying number and issuing jurisdiction from an acceptable identification document, along with an image of that document. Such a document might include a driver's license or passport.

Excluded from the definition of beneficial owners are: (i) minor children (parents or guardians are required to report), (ii) nominees, (iii) employees, other than senior officers, (iv) future inheritors; and (v) creditors.

Penalties for the willful failure to report complete or updated beneficial ownership information, or the willful submission of or attempt to provide false or fraudulent beneficial ownership information can be severe.

These penalties may include civil fines of $500 per day for each day a violation continues and criminal penalties of imprisonment for up to two years and/or a fine of up to $10,000.

If you find yourself wanting more advice and information on how my team and I can help you avoid fines and penalties that may result from not complying with CTA 2024, we are available in person, by appointment or by Zoom. In South Texas, call us at 956-791-5422.