U.S. M&A Newsletter — December 6, 2024

Earlier this 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). As noted before, under the CTA, reporting companies are any U.S. companies or non-U.S. companies registered to do business in the U.S. that do not meet one of 23 exemptions. Reporting companies are required to make beneficial ownership information reports (“BOIRs”) with the Financial Crimes Enforcement Network (“FinCEN”). Reporting companies created before January 1, 2024, had until the end of the year to file their BOIRs. Newly created entities that are created in the U.S. or registered to do business there after January 1, 2024, have 90 days after creation or registration to file their BOIR this year and 30 days after creation or registration for reporting companies created or registered after January 1, 2025. The preliminary injunction stays the upcoming end of year CTA deadline for reporting companies created prior to January 1, 2024, but does not address the deadlines for reporting companies created after January 1, 2024. 

There are many open questions at this stage. For example, it is unclear if the U.S. government will appeal this decision and either seek to have it overturned or try to narrow the decision. In addition, the court’s decision is preliminary, and it is unclear how long it will remain in place. If the preliminary injunction is reversed, then the prior deadlines will apply and there may or may not be a transition period offered for filings to be made. In addition, FinCEN, as it has done on other occasions involving similar court challenges, may provide guidance on the application of the decision in the near term and that guidance will impact issues that need to be considered. Further, the upcoming change in administration and changes at the Department of Treasury very well may impact the CTA’s application and the timing of any changes or relief. 

Given the uncertainty in this area we advise clients to carefully consider next steps, including the following questions, and seek legal counsel as necessary: 

• Have you made your BOIR filings for entities created before January 1, 2024?
  • If yes, do you have a system in place to monitor for changes in information reported on the BOIR?
  • If no, do you have all the information you need to make the BOIR filings?
• Have you created or registered entities that are reporting companies this year?
  • If yes, have you made a BOIR filing yet?
    • If you have made a filing, do you have a system in place to monitor for changes in information reported on the BOIR?
    • If you have not made a filing, do you have all the information you need to make a BOIR filing?

To prepare for any of the possible outcomes, we would advise anyone who chooses not to continue filing BOIRs to continue to retain records of all entities created and the information required to file a BOIR so that if they need to file a BOIR in the future, you are prepared to do so. Further, if you have not gathered the information to make end of year BOIR filings, we would recommend you gather such information in case you are required to make a filing in the future as the year-end deadline is reinstated in various scenarios.

Further, we note that state laws related to beneficial ownership, such as New York’s LLC Transparency Act that goes into effect on January 1, 2026, are not affected by this preliminary injunction at present.

We will keep you up to date if and when we receive further guidance from FinCEN or the courts.