Wrestling with Corporate Transparency Act requirements? This blog highlights key concepts, including deadlines, beneficial ownership information requirements, and exemption updates. Learn how to ensure your company’s compliance.
The Corporate Transparency Act Updates: What Legal Teams Need to Know
On March 5, CSC hosted a webinar examining the recent updates concerning the implementation of the Corporate Transparency Act (CTA) and its implications for businesses.
During the webinar, CSC’s experts Allison Gerhart, vice president of International Compliance and Governance, and David Jefferis, senior director of Product Management, Global Compliance, discussed the Corporate Transparency Act, what CSC has learned since the CTA went live on January 1, 2024, and how CSC can help corporations and law firms manage CTA requirements and filings. This blog summarizes the essential information that law firms and corporate legal teams need to be aware of.
What is the Corporate Transparency Act?
In summary, the CTA requires corporations, LLCs, or similar entities that fall under the definition of a reporting company to submit a filing to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) containing information regarding the individuals who directly or indirectly own or control a company.
The goal of the CTA is to protect national interests and prevent malign actors from concealing their ownership of business entities in the U.S. to engage in illicit activity. These requirements are estimated to apply to a large number of business entities—around 32 million in the U.S.. There are 23 exemptions applicable to certain types of businesses, such as publicly traded companies, banks, and credit unions.
The CTA knowledge gap
During our webinar, we surveyed our audience of more than 1,000 corporate legal professionals, attorneys, and law firm staff on how comfortable they are with CTA requirements and asked about CTA-related topics they are challenged by.
The results revealed that participants still feel unprepared for the requirements of this regulation:
- Only 4% of those who worked for a corporation felt very comfortable/confidently up-to-date with requirements; this figure rose to only 15% among law firm representatives
- 45% of those who worked for a corporation and 29% of those who worked for a law firm admitted to being very unclear about CTA requirements
- Preparing and managing beneficial ownership information (BOI) filings was regarded as the most challenging CTA topic among corporate attendees, while gathering beneficial owner and company applicant information was the primary concern among the law firm audience
Three aspects of the CTA to be aware of
- Implementation timeline: Foreign and domestic reporting companies created or registered prior to January 1, 2024 must file their initial beneficial ownership information (BOI) report no later than January 1, 2025. Reporting companies, again both foreign and domestic, newly created, or registered on or after January 1, 2024 but before January 1, 2025, must file their initial BOI report no later than 90 calendar days after the earlier of:
- The date on which the reporting company receives actual notice that its creation or registration has become effective.
- The date on which a secretary of state or similar office first provides public notice that the reporting company has been created or registered.
- Beneficial ownership information: The CTA requires reporting companies to disclose a variety of information about their beneficial owners, including their full name, date of birth, residential address, and a unique identifying number from specific government documents issued to the individual, along with an image of the document provided.
- Exemptions: FinCEN has issued several FAQs to clarify the scope of CTA exemptions. Legal teams should carefully review the full list of exemptions to determine if these apply to their company.
How to stay compliant with the CTA
Engaging a partner such as CSC to guide your business through the process can help keep your business compliant. Our in-depth webinar discussion of the latest updates and their implications for businesses provides a good starting point. You can find the full recording here, and to learn more about our solutions to ensure continued compliance, visit our Business Administration and Compliance services page.
