The U.S. District Court of the Eastern District of Texas has recently issued a nationwide preliminary injunction against the enforcement of the CTA, including the Beneficial Ownership Information Reporting Rule (BOI Reporting Rule).  Subject to 23 exemptions, the BOI Reporting Rule requires legal entities formed or registered to do business in the United States to report beneficial ownership information to a national database maintained by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury.  The preliminary injunction has stayed reporting and enforcement of the BOI Reporting Rule.

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While the Department of Justice (DOJ) has entered a notice of appeal, FinCEN has stated that FinCEN will comply with the injunction for as long as it remains in effect, and that “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.”   It has also stated that the BOI reporting may be done on a voluntary basis if a reporting company chooses to do so.

 

Key takeaways:

• Reporting companies may, for the time being, choose to hold off on submitting (i) their initial BOI reports, or (ii) any amended or updated BOI reports.

• DOJ is expected to seek a stay of the preliminary injunction pending appeal. Reporting companies should closely monitor any updates on the development of this ongoing litigation.