U.S. M&A Newsletter — December 11, 2024
FinCEN Statement on Texas District Court Preliminary Injunction
As we noted, last week a U.S. District Court in Texas granted a preliminary injunction that enjoins enforcement of the Corporate Transparency Act and its implementing regulations (“CTA”). See Texas Top Cop Shop, Inc., et al v. Garland et al, No. 4:24-cv-00478 (E.D. Tex. Dec. 3, 2024). The preliminary injunction made clear that the end of year deadline for reporting companies to file beneficial ownership information reports (“BOIRs”) with the Financial Crimes Enforcement Network (“FinCEN”) in compliance with the CTA was stayed. However, whether filings for reporting companies created within the past 90 days or reporting companies that had filed their BOIRs and had to update the filings because of changes could also cease making BOIRs was less clear.
Yesterday, FinCEN issued a statement clarifying reporting company obligations. FinCEN States that in light of the recent preliminary injunction “reporting companies are not currently required to file [BOIRs] with FinCEN and are not subject to liability if they fail to do so while the order remains in force.” The statement goes on to clarify that reporting companies may voluntarily submit BOIRs but are under no obligation to do so. FinCEN also restated its belief that the CTA is constitutional and noted that other courts in other cases have come to the same conclusion and denied requests to enjoin the CTA.
As we noted previously, despite the current posture of FinCEN, the preliminary injunction is not a permanent action and is subject to appeal. In fact, the Department of Justice filed notice of an appeal on FinCEN’s behalf last week. We recommend preparing to file BOIRs so that if the deadlines are reimposed you are prepared to comply quickly.
