Written by Mark Buckley-Jones
Director
January 1, 2024 was the effective date of a new rule issued under the Corporate Transparency Act which requires domestic and foreign corporations, limited liability companies and other similar entities (each a “Reporting Company”) registered to do business in the United States to report beneficial ownership information (“BOI”) to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).
The BOI report includes certain information about a Reporting Company’s beneficial owners. A “beneficial owner” is any natural person who directly or indirectly:
- Exercises substantial control over a Reporting Company; or
- Owns or controls 25% or more of the ownership interests of a Reporting Company.
Entities formed on or after January 1, 2024 are also required to include information about “company applicants”, defined as any individual who is primarily responsible for the filing of the document that creates or registers the entity.
Exemptions
The Corporate Transparency Act includes 23 exemptions to the definition of Reporting Company that exclude a substantial number of entities from the definition and therefore reporting requirements of the Act. Each exemption has specific requirements that an entity must satisfy to qualify for the exemption.
Certain of the available 23 exemptions apply specifically to asset managers, e.g., SEC registered investment advisers and commodity pool operators and commodity trading advisors registered with the CFTC.
While these entities are expressly exempt from the definition of a Reporting Company, other asset managers, including exempt reporting advisers (“ERAs”), are not and may be in scope unless one or more of the other exemptions apply. Similarly, the general partner or managing member of a private fund advised by a registered investment adviser may be considered a Reporting Company. This will require evaluation on a case-by-case basis.
In determining whether exemptions apply, investment advisers should consider all specific facts and circumstances and ownership structures applicable to their own organization.
Effective dates
The date by which BOI reports are required to be filed varies depending on when a Reporting Company is registered:
| Date of registration | Initial BOI report deadline |
|---|---|
| Prior to January 1, 2024 | January 1, 2025 |
| On or after January 1, 2024 but before January 1, 2025 | Within 90 calendar days after registration has become effective |
| After January 1, 2025 | Within 30 calendar days after registration has become effective |
If there is any change to the information included in a BOI report, the Reporting Company must file an updated BOI report no later than 30 calendar days after the date of the change.
Conclusion
The Corporate Transparency Act is complex and many open questions relating to its implementation remain. Investment advisers should carefully review their own entity structures versus the requirements of the Act in making a determination of whether a BOI report is required to be filed with FinCEN. We will continue to monitor all additional information and guidance issued by FinCEN as it becomes available.
