July 9, 2024

New Reporting Requirement for Beneficial Owners

In the National Defense Authorization Act (NDDA), enacted by Congress on 1 January 2021, the U.S. Treasury Department (Treasury) was directed to establish a national registry of beneficial owners of companies operating in the United States.  As a result, on 1 January 2024, Treasury launched a website under https://www.fincengov.boi to implement the new “beneficial ownership” reporting requirement, as called for in the Corporate Transparency Act (CTA), with the latter being part of the NDAA.

The CTA requires certain companies operating in the United States to report their beneficial owners to Treasury. Except for 23 categories of exempted companies, most notably from regulated industries which already require beneficial ownership reporting, e.g. the banking industry and publicly traded companies, companies required to file the report, referred to as “Reporting Companies”, are grouped into two categories, namely:

–  Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

– Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

The term “beneficial owner” is defined with respect to natural persons.  A beneficial owner is an individual who, either directly or indirectly, i) exercises substantial control, e.g. as the president, over the reporting company, or ii) owns or controls 25% or more ownership interest in the reporting company.

The deadline for filing the report varies depending on the date the Reporting Company was created or registered to do business in a jurisdiction within the United States.  The following three deadlines apply:

i) a reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial report.

ii) a reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.

iii) a reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.

The CTA requires the reporting company to identify the name, address, and tax number of the reporting company.  For those individuals qualifying as beneficial owners, the name, current residential address, date of birth and an “image” of an identifying document, e.g. a passport, must be provided in the report.