On December 3rd, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against all enforcement of the Corporate Transparency Act’s reporting requirements. Days later, the U.S. Department of Justice filed an appeal of that order with the U.S. Court of Appeals for the Fifth Circuit. Although the federal government’s pending appeal has no impact on the injunction, it is possible that the government may seek an emergency stay from the U.S. Supreme Court pending disposition of its appellate motion.
In the meantime, until this issue is resolved by the Court of Appeals, or a stay of the injunction is ordered, reporting companies are not required to file beneficial ownership information with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), and will not be held liable for failure to do so while the injunction is in place. However, if and when the injunction is lifted, reporting companies should be prepared to file, keeping in mind the CTA’s stiff penalties for noncompliance.
Finally, reporting companies that wish to voluntarily submit beneficial ownership information reports to FinCEN may continue to do so.
If you are a reporting company and would like to discuss your options during this period of uncertainty, please contact Don Levy at dlevy@outsidegc.com.
Don Levy is a Partner on OGC’s California-based team. Don is a seasoned transactional and commercial attorney with deep experience in a wide range of technologies, including Internet/e-commerce, communications (wireless and satellite), semiconductor, software, SaaS, mobile device, market research, and entertainment/media. As a former legal and business executive, Don helps technology companies efficiently and creatively navigate complex legal issues in dynamic environments.