Corporate Transparency Act disclosure rules means boards must act now to stay compliant and avoid penalties. Read more from Deirdre Hochman, Head of USA Corporate and Administration Services, Adrienne Lenz, Corporate Secretarial and Board Support (Americas) and Brad Andaloro, Assistant Vice President Fund Accounting (US)
Preparations for the US Corporate Transparency Act (CTA), which was passed in January, and imminent corporate income tax increases will dominate discussions in US boardrooms this year.
The Act’s purpose is to help law enforcement identify undisclosed individuals in corporate structures. This is to prevent money laundering and terrorist financing. Board members and directors of US companies, Special Purpose Vehicles (SPVs) and non-US entities registered to do business in the US will all be affected.
Intertrust Group’s US Corporate Secretarial Services (CoSec) team will work with colleagues across the group’s US and global network of corporate, accounting and fund services to support new and existing clients through the Act’s transition period.
How will the Corporate Transparency Act affect me?
The Corporate Transparency Act requires corporations and limited liability companies (LLCs) to inform the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN)of any information about individuals who own and control an entity at its formation.
The CTA registry is a significant change to US anti-money laundering (AML) regulations, according to a report by law firm White & Case. Some US states, such as Delaware and Nevada (where the majority of SPVs and entities are registered), do not require this level of disclosure at present. Such resolutions have only been reported internally.
These disclosures won’t take effect until rules are imposed by the Secretary of Treasury, which will be no later than January 1, 2022, according to the National Law Review.
Under the Act, any changes such as registrations, resolutions and board changes, must be updated with authorities and institutions such as FinCEN. If beneficial owner changes are not updated immediately, non-compliance and misuse penalties could be imposed.
Those who fail to disclose the required information (or disclose inaccurate information) could face $500 per day in civil monetary penalties, and a fine of up to $10,000, up to two years in prison, or both.
Intertrust Group’s registered agent and CoSec services can help ensure that existing and newly registered entities comply.
The Corporate Transparency Act is not curbing deal activity
Despite the approaching CTA requirements, pending corporate tax increases and more onerous environmental, social and governance (ESG) reporting requests from stakeholders, we have not seen US registrations slowing.
Therefore, we expect new and existing corporate and fund clients will continue to register entities and SPVs in the US. This could include Special Purpose Acquisition Companies (SPACs), which dominate the US deal landscape.
We are certain, however, that these reforms can only add to the in-house burden of time and costs on client resources relating to corporate governance.
We are therefore strengthening our US CoSec services to prepare clients for next year’s disclosure requirements and upcoming board meeting agendas.
Partnering for peace of mind
The lack of transparency regarding individuals who own and control a US entity can delay board meetings until the information is tracked down or replacement directors put in place if changes occurred since the last meeting.
This is just one area where we work with in-house paralegals and other staff to ensure information is updated in a timely and well-organised manner.
Our Ironstone independent directors service can help fill director placements and provide additional governance controls. This would also ensure clients have the most up-to-date director information should they have to provide it.
Taking the burden out of board meetings
Although board meetings recur regularly, there always seems to be a last-minute scramble for information.
As well as identifying active board members, sending invitations and accommodating schedules, there is the agenda to prepare – which must include any new business that could radically change the agenda at the last minute.
Then there is the collating of compliance updates, financial reports and any pending transactions. All this data must be assembled into a cohesive meeting pack followed by the minutes and action plans.
Our US CoSec team can help take over many of these onerous tasks. We manage this information year on year – and, for clients receiving services under our other lines, we may already have the necessary information at hand.
Why Intertrust Group’s Global Corporate Secretarial Services and Registered Agent Services?
- Company secretarial services including board support services and resolutions
- Corporate Services including registered agent, company formation, registered address, and process agent services
- Fiduciary and corporate governance services include the provision of independent directors or managers
- Regulatory and compliance services including: Common Reporting Standards, Foreign Account Tax Compliance Act, Country-by-Country notification and OECD Local and Master File, Know Your Customer obligations and Legal Entity Identifier.
- Ultimate Beneficial Owner registration
- Obtaining official corporate documents such as certificates of incorporation and certificates of good standing
- Transactional services such as name or director changes
- Compliance with applicable local rules and regulations, through a single point of coordination, across your international entities
- Standardising local and central compliance reports
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