FinCEN Clarifies Application of Beneficial Ownership Reporting Rules to Dissolved Entities
Reporting companies should take note of a recent clarification by the Financial Crimes Enforcement Network ("FinCEN") that the Beneficial Ownership Information ("BOI") Rule requires reporting companies that exist on or after January 1, 2024, to file a report even if they fully dissolve prior to their initial reporting deadline.
On July 8, 2024, FinCEN published new Frequently Asked Questions ("FAQs") clarifying that reporting companies existing on or after January 1, 2024, must report BOI to FinCEN within the time proscribed in the BOI Rule. (FAQ C.12-C.14). FinCEN explained that this requirement exists even if the entity was dissolved prior to its deadline to file a report. For instance, a reporting company formed in 2024 has a 90-day deadline to file an initial report and must do so even if it ceases to exist 89 days after its formation. Prior to this guidance, it was unclear whether entities that dissolved prior to their filing deadlines would need to file a BIO report, as FinCEN had indicated that reports "should only include the beneficial owners as of the time of the filing" and not "historical beneficial owners." (FAQ G.4).
The new FAQs also confirm that reporting companies that ceased to exist before January 1, 2024 (when the BOI Rule became effective), do not need to file a beneficial ownership report. For purposes of the BOI Rule, an entity ceases to exist when it has "entirely completed the process of formally and irrevocably dissolving," which is dependent upon the jurisdiction where the entity was created or registered. Reporting companies that began the dissolution process in 2023 must consider whether that process was complete prior to January 1, 2024. If not, they must file an initial report even if now fully dissolved.
Reporting companies should be aware that once a report is filed, the dissolved company has no further reporting obligations. Dissolved companies do not need to file any update that they have dissolved.
Reporting companies should continue to monitor FinCEN's website for periodic updates to its FAQs about the BOI Rule. Reporting companies with questions about the operation of the BOI Rule and the FAQs should consider consulting outside counsel.
