After years of back-and-forth drama, the Corporate Transparency Act appears to have been defanged, at least for the moment. Until nationwide injunctions brought the process to a halt late last year, most newly formed and small entities were required to file a report with a branch of the U.S. Treasury Department called the Financial Crimes Enforcement Network (FinCEN). Although FinCEN initially contested the injunctions, it has now issued an Interim Final Rule that entities created under the laws of any U.S. jurisdiction are exempt from filing to report their beneficial ownership. Only entities formed under the laws of a foreign country that register to do business in the U.S. are required to submit reports.
Keep in mind that the rules are not locked in place. They may change again. While there have been endless arguments over the wisdom of the CTA, and there are sure to be arguments about the extent to which administrative law allows an agency to override the language of its enabling statute, enforcement priorities vary with political, social and economic conditions. It is not today’s problem, but a change of Treasury Department policy or administration may make it a concern again. We continue to recommend that shareholders agreements, limited liability company agreements and partnership agreements contain provisions requiring shareholders, members and partners to provide information their companies request in order to comply with the CTA. It is best to think of the CTA as the undead corporate compliance act.
Jeffrey Fink’s practice focuses on strategic relationships and business partnerships – from coaching, strategy, structuring, formation, operation and dispute resolution to dissolution or sale. He is a member of the firm’s Executive Committee.