There is a lot of confusion about "who is the CTA Company Applicant" under the Corporate Transparency Act.
The confusion stems from two places. First, the phrase "company applicant" is new. The concept was created by the Corporate Transparency Act and is not familiar to business owners or business lawyers.
Second, the direction that FinCEN took in its initial draft regulations (sometimes called the Advanced Notice of Proposed Rulemaking, or ANPRM) differed from the direction that FinCEN took in its Final Rule on beneficial ownership reporting.
When to File CTA Company Applicant Information
The Corporate Transparency Act requires both foreign and domestic reporting companies to file a beneficial ownership report with FinCEN.
Companies that exist on the effective date of the Final Rule (January 1, 2024) will have one year in which to file their first beneficial ownership report.
Companies formed after the effective date will need to file an initial beneficial ownership report within 30 calendar days of their date of formation.
Each beneficial ownership report must include five specific items of personally identifiable information about each beneficial owner of the reporting company (full legal name, residential address, date of birth, a unique identifying number (such as a drivers license or passport) and an image of the document that provides the unique identifying number).
Under the ANPRM every reporting company would have been required to file the same five pieces of information for the reporting company's "company applicant."
Under the Final Rule, only a reporting company formed on or after the effective date of January 1, 2024 will need to identify its CTA Company Applicant and provide the information required for the CTA Company Applicant.
When a reporting company formed on or after January 1, 2024 files its first beneficial ownership report, it will need to include the full legal name of its CTA Company Applicant, along with that person's home address (except that if the company applicant formed the reporting company in the course of such company applicant's business, the reporting company should instead provide the street address of such business), unique identifying number and an image file of the document that provides the unique identifying number.
Who is the CTA Company Applicant
The ANPRM had defined "company applicant," confusingly, making it possible for there to have been several individuals who collectively were the "company applicant." FinCEN eliminated that confusion in its Final Rule, where it defined "company applicant" as follows:
(e) Company applicant. For purposes of this section, the term "company applicant" means:
(1) For a domestic reporting company, any individual who files the document that creates the domestic reporting company as described in paragraph (c)(1)(i) of this section, including any individual who directs or controls the filing of such document by another person; and
(2) For a foreign reporting company, any individual who files the document that first registers the foreign reporting company as described in paragraph (c)(1)(ii) of this section, including any individual who directs or controls the filing of such document by another person.
As a result, for most domestic reporting companies, the company applicant will mean the individual who directly files the document that creates the domestic reporting company. For a corporations, the "document" will be the articles of incorporation or a certificate of incorporation. For a limited liability company, the document would be the articles of organization or certificate of organization.
For a foreign reporting company, the company applicant will be the individual who first registered the foreign reporting company to do business in the United States.
To avoid the confusion of having multiple individuals potentially being identified as a company applicant, the Final Rule provides that "the individual who is primarily responsible for directing or controlling [the filing will be the company applicant] if more than one individual is involved in the filing of the document."
Practical Steps for Identifying the CTA Company Applicant
FinCEN's File Rule eliminated much confusion and also created a fairly simple rule for reporting companies to apply when identifying who is their CTA Company Applicant.
Reporting companies that exist before January 1, 2024 will not need to identify their CTA Company Applicant in their beneficial ownership reports.
Reporting companies that are formed on or after January 1, 2024 will need to identify their CTA Company Applicant and provide the five pieces of personally identifiable information about that person. If more than one person is involved in forming the reporting company, or registering a foreign reporting company to do business in the United States, the individual who is primarily responsible for directing or controlling the filing will be the CTA Company Applicant for that reporting company.
About The Author
Jonathan Wilson is the co-founder of FinCEN Report Company with 31 years of experience in corporate, M&A and securities matters. He is the author of The Corporate Transparency Act Compliance Guide (to be published by Lexis Nexis in the summer of 2023) and the Lexis Practical Guidance Practice Note on the Corporate Transparency Act.