New US companies may be given extra time to file beneficial ownership reports

Thursday, 05 October 2023
With only three months to go before the reporting obligations of the federal Corporate Transparency Act (the Act) come into force, the US Department of the Treasury is proposing that companies created or registered in 2024 will be granted 90 days, instead of 30, to file their initial beneficial ownership reports.
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The Act was enacted into US federal law in January 2021 as a new beneficial ownership reporting regime for US companies and non-US companies doing business in the US. It creates a national registry of company beneficial ownership information accessible only by law enforcement, government agencies and other officials. Companies and other entities, unless they qualify for exemption, must provide certain identifying information of their beneficial owners and company applicants to the US Treasury's Financial Crimes Enforcement Network (FinCEN). FinCEN will operate and enforce the system. The purpose of the Act is to prevent the illicit use of shell companies to conceal illegal activity or to facilitate money laundering, tax evasion and other criminal activities. 

The system is due to come into operation on 1 January 2024. The rules originally set out by FinCEN specified that entities already in existence by that date would have until 1 January 2025 to file their beneficial ownership reports. Entities created after 1 January 2024 would have 30 calendar days to file. This caused some concern around newly formed companies fulfilling their reporting obligations.

Under the proposed new timetable, the deadlines will be as follows:

  • companies formed or registered before 1 January 2024 still have until 1 January 2025 to file;
  • companies formed or registered on or after 1 January 2024 have 90 calendar days after receiving 'actual or public notice' that the creation or registration of the reporting company is effective; and
  • for companies formed or registered on or after 1 January 2025, the deadline reverts to 30 calendar days of receiving notice that their company has been officially created or registered.

The government has also altered its reporting requirements. Previously, it had intended to allow companies that had been unable to ascertain the identities of their beneficial owners within the time available to submit incomplete reports indicating that they were unknown. FinCEN has now changed its guidance on the reporting rules so that entities will not be allowed to do this. Instead, it proposes that its beneficial ownership secured system will not accept a reporting company's disclosure filing unless all the required fields are fully completed. Any field left blank, whether intentionally or accidentally, will prevent the filer from submitting their report.

'An extension will give reporting companies created or registered in 2024 additional time to understand their regulatory obligations under the reporting rule and obtain the required information', said FinCEN. 'They will also have additional time to become familiar with FinCEN’s guidance and educational materials...and resolve questions that may arise in the process of completing their initial [beneficial ownership] reports. After January 1, 2025, however, reporting companies should be familiar with [beneficial ownership] reporting requirements and be in a better position to file required [beneficial ownership] reports on a timely basis.'

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