January 6, 2022

Corporate Transparency: FinCEN Proposes Beneficial Ownership Information Reporting Regs

I’m sorry to disappoint those of you hoping to hear something from the SEC on its long-anticipated 13(d) reporting reform proposal, but today I’m blogging about a different set of beneficial ownership reporting rules. You probably should listen up anyway, because the proposed regs I’m talking about could be a big deal for a lot of public and private companies.

Last month, Treasury’s Financial Crimes Enforcement Network (FinCEN) proposed regulations on reporting of beneficial ownership information under the Corporate Transparency Act. These proposed regulations will create new federal filing requirements applicable to a wide range of entities (including operating companies, holding companies, LLCs and others). Here’s an excerpt from this Wilson Sonsini memo on the potential scope of the reporting requirement:

The proposed regulations would require every foreign or domestic legal entity that qualifies as a “reporting company” — FinCEN estimates that 25 million existing legal entities, plus an additional three million new legal entities each year, will meet the criteria—to file reports with FinCEN that identify the beneficial owners of the entity as well as the individuals who have filed to form or register the entity. Companies and individuals who fail to comply with or properly facilitate the reporting process (e.g., by providing inaccurate or incomplete information to reporting companies) may be subject to potential civil and criminal penalties, including potential imprisonment.

The memo provides plenty of additional details about the scope and operation of the proposed regulations, including what information is required to be reported and when filings must be made, and the exemptions that could apply to public reporting and large operating companies. The public comment period ends on February 8, 2022, and the memo says final regs are expected sometime this year.

John Jenkins