17-Jan-2024 Beneficial Ownership Information [BOI] Reporting

What is the Corporate Transparency Act?
The U.S. Congress enacted the ‘Corporate Transparency Act’ in 2021 as a measure to increase the transparency in ownership structures of entities doing business in U.S. Markets. The law is intended to combat money laundering, tax fraud, drug trafficking, corruption or any other unlawful activities which may be carried on by taking the shelter of corporate entities in the U.S.

What does it require?
Under this Act, the specified persons will be required to file a BOI report containing the prescribed information to the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury.

Who has to file the BOI Report? 
As per FinCEN’s Small Entity Compliance Guide issued on September 18, 2023, the specified persons required to file the report are called ‘Reporting Companies’. There can be two types of reporting companies:

• - Domestic Reporting Companies (e.g., corporations, LLCs etc. incorporated in the U.S.)
  - Foreign Reporting Companies (e.g., corporations, LLCs etc. incorporated under laws of a foreign country but have registered to do business in the U.S.)

Are there any exemptions from the BOI reporting requirement?
There are around 23 types of entities that are exempt from such reporting requirements which include inter-alia Banks, Government Authorities, Insurance Companies etc.

What information needs to be reported in the BOI Report?
The information that is to be reported depends on when the company was created or registered, namely,

The information to be reported about itself will include Legal Name, Trade Name, Taxpayer Identification Number etc.
 

The information to be reported about beneficial owners & company applicants (if required) will include the Individual’s Name, Date of Birth, Residential Address, any Identifying Number such as passport number or U.S. driver's license number etc.

Who are the Beneficial Owners?
A beneficial owner includes any individual who directly or indirectly, either 
- Exercises substantial control (primarily referring to decision-making) over a reporting company or
- Owns or controls at least 25% of the ownership interests of a reporting company

Who are the Company Applicants?
A company applicant can be either of the following two persons:
- An individual who directly files the document that creates the entity, or in the case of a foreign company, the document that registers the entity to do business in the U.S. or 
- An individual who is primarily responsible for directing or controlling the filing of relevant documents by another 
 

E.g., if Mr. Neel is directly filing the company creation documents, he will be treated as the company applicant. However, if Mr. Neel is filing the documents under the direction or control of Mr. Frank, then Mr. Frank would be treated as a company applicant.

What are the deadlines?
The filing requirements will be effective from January 1, 2024.

*The initial report filed once is not to be filed annually again, however, if there is any change in the information already submitted, then an updated report specifying such change must be filed no later than 30 days after the date of the change.

What are the penalties for non-compliance with BOI reporting?
For wilful failure to file a BOI report, wilfully filing false information or wilfully failing to correct or update a previously filed report, the following penalties can be levied:
- Civil penalties up to $500 per day until the default continues, or 
- Criminal penalties of up to 2 years of imprisonment and/or a fine of up to $10,000

What is the latest news on BOI reporting?
On January 1, 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) began accepting such beneficial ownership information reports.

P.S.: The above-mentioned information is only a summary of the BOI reporting requirements. For more details, please connect with us at [email protected].