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FINCEN has issued an Advance Notice of Proposed Rulemaking, or ANPRM to solicit public comment on a wide range of questions related to the implementation of the beneficial ownership information reporting provisions of the Corporate Transparency Act, or CTA.

The CTA requires reporting of beneficial ownership information by “reporting companies.” The CTA defines a reporting company as a corporation, LLC, or other similar entity that is (i) created by the filing of a document with a secretary of state or a similar office under the law of a state or Indian tribe, or (ii) formed under the law of a foreign country and registered to do business in the United States by the filing of a document with a secretary of state or a similar office under the laws of a state or Indian tribe. The CTA exempts certain categories of entities from the reporting requirement.

The CTA defines a beneficial owner of an entity as an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity, or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.

Specifically, reporting companies must report, for each identified beneficial owner and applicant, the following information: (i) Full legal name; (ii) date of birth; (iii) current residential or business street address; and (iv) a unique identifying number from an acceptable identification document or the individual’s FinCEN identifier.

The ANPR poses the following questions for public comment amongst many others:

  • How should FinCEN interpret the phrase “other similar entity,” and what factors should FinCEN consider in determining whether an entity qualifies as a similar entity?
  • What types of entities other than corporations and LLCs should be considered similar entities that should be included or excluded from the reporting requirements?
  • To what extent should FinCEN’s regulatory definition of beneficial owner in this context be the same as, or similar to, the customer due diligence rules adopted by FINCEN or the standards used to determine who is a beneficial owner under Rule 13d-3 adopted under the Securities Exchange Act of 1934?
  • Should FinCEN define either or both of the terms “own” and “control” with respect to the ownership interests of an entity? If so, should such a definition be drawn from or based on an existing definition in another area, such as securities law or tax law?
  • Should FinCEN define the term “substantial control”? If so, should FinCEN define “substantial control” to mean that no reporting company can have more than one beneficial owner who is considered to be in substantial control of the company, or should FinCEN define that term to make it possible that a reporting company may have more than one beneficial owner with “substantial control”?

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