The Corporate Transparency Act (CTA) introduces beneficial ownership reporting requirements effective January 1, 2024, for new and existing companies. The CTA reporting obligations also impact due diligence for mergers and acquisitions (M&A) and in-house formation of new entities. It is especially relevant for renewable energy project developers, energy transition private equity funds and sustainable infrastructure funds due to the fact that renewable energy developers often have a complex corporate structure of holding companies and project companies that are often further siloed across technologies such as solar, wind and storage. Each renewable energy project, therefore, has its own separate project company, its intermediate entities and, ultimately, the parent that will need to comply with the CTA. We note that the CTA does not permit a single parent company to submit a single filing covering all its subsidiaries in the aggregate. Instead, each entity will require its own separate beneficial ownership analysis and its own separate CTA filing.
KEY TAKEAWAYS
- The CTA introduces beneficial ownership reporting requirements effective January 1, 2024, for new and existing companies.
- The CTA does not permit a single parent company to submit an aggregate filing covering all of its subsidiaries.
- Under the CTA, each entity will require its own beneficial ownership analysis and its own separate filing.
- Developers and sponsors often have complicated corporate structures with numerous entities and beneficial owners. The CTA requires a separate report to be filed for each reporting company unless an exemption applies—which could require developers and sponsors to file dozens, if not hundreds, of reports by the January 1, 2025, deadline for existing companies.
- In addition, these CTA reporting obligations create a new diligence and process items for M&A transactions, with buyers and sellers now needing to address the pre- and post-closing implications of CTA reporting obligations for the companies involved in the transaction, such as identifying a target company’s compliance and filing updated CTA reports for acquired companies post-closing.
- Developers and sponsors should move quickly to identify applicable exemptions and relevant beneficial owners for their reporting companies.
Companies formed by filing a document in any US jurisdiction, or a non-US company registered to do business in any US jurisdiction—and which do not meet one of the 23 exemptions—must report company information and beneficial owner information (and also, for new companies, company applicant information) to the US Department of Treasury’s Financial Crimes Enforcement Network—this information will not be publicly available but can be accessed by certain governmental authorities. Reporting companies formed/registered before January 1, 2024, must file their initial report by January 1, 2025, and reporting companies formed/registered on or after January 1, 2024, must file their initial report within 90 days following such formation/registration (and, starting January 1, 2025, this 90-day period is reduced to 30 days)—updated reports must be filed within 30 days following a change to reported information.
To obtain answers to frequently asked questions about the new reporting guidelines, read our Corporate Transparency Act: What to Know On the Subject.
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