TheCorporateCounsel.net

Following up on this week’s theme of “why you need to pay attention to things you thought you could ignore,” this Locke Lord blog explains why the “public company” exemption for the Corporate Transparency Act isn’t enough to insulate public companies from having to conduct a compliance review and install new internal controls. Here’s an excerpt:

There is also an exemption from the filing requirement for subsidiaries of public companies (and other exempt companies), but that exemption only applies to wholly owned or controlled subsidiaries. Any subsidiaries or investment entities of public companies that do not meet the wholly owned or controlled test do not qualify for this subsidiary exemption although they may qualify for one of the other statutory exemptions.

The blog walks through detailed considerations and offers these compliance pointers as we move forward in this brave new world:

As public companies form new entities, enter into joint ventures, exit or dissolve joint ventures and make investments, they may find themselves, the joint venture or one of their affiliates subject to a reporting requirement under the CTA. Those could include M&A transactions, venture capital, vendor or supplier investments, and internal corporate restructurings (other than solely among wholly owned/controlled subsidiaries).

Also remember that, if you, as a lawyer, are overseeing entity formation filings, you are a “company applicant” who needs to register with FinCEN! And guess what, your paralegals and mailroom folks might be too. John wrote about that insanity earlier this month.

– Liz Dunshee