The recent coming of the Corporate Transparency Act has brought a new issue to the forefront of the business and legal world. The act requires certain businesses to report the beneficial ownership of their companies to the Financial Crimes Enforcement Network (FinCEN). However, there are a few exemptions to reporting, and this blog post delves into what some those exemptions are.
Reporting Companies
The Corporate Transparency Act states that companies that have registered with the Securities and Exchange Commission (SEC), or that have certain conditions outlined by the SEC, are exempt from the beneficial ownership reporting requirement. As per the act, a company would be considered a reporting company if it has a class of equity securities, as well as a reporting obligation under the Securities Exchange Act of 1934, or if part of the company’s business involves registering with the SEC.
Employee Stock Option Plan
Companies that provide employee stock option plans as part of their employee benefits are also exempt from the reporting requirements. However, this exemption is only applicable if the beneficial ownership information cannot be obtained through other means and if the employee share scheme is based on the company’s equity interests.
Banking Agencies
Under the Corporate Transparency Act, banking agencies are also exempt from the beneficial ownership reporting requirements. However, a banking agency must report any beneficial ownership information that is required to be disclosed under the applicable federal banking laws and regulations.
Publicly Traded Companies and Subsidiaries
The act also exempts companies that are publicly traded on stock exchanges and their subsidiaries from the reporting requirements. These companies are already required to make regular and comprehensive financial disclosures, so the beneficial ownership reporting requirements are considered redundant.
Trusts
The final exemption we’ll list here pertains to specific trust-entity exceptions. Irrevocable trusts, which are primarily used for estate planning or safeguarding assets, are not subject to the Corporate Transparency Act’s beneficial ownership reporting requirements. The same goes for trusts that are formed by court order or has been declared in a U.S. bankruptcy proceeding.
The Corporate Transparency Act’s beneficial ownership reporting requirements exclude certain businesses and trusts. Companies that are already reporting under SEC regulations, public companies, and employee share schemes are examples of some of the exemptions. We hope this blog post has helped elucidate the exemptions under the Corporate Transparency Act, and we are available to assist you in navigating the complexities of the act and how it may apply to your company.
Business Law Southwest. Business law that makes business sense.
