Corporate Transparency Act Clauses
(Credit Agreement)

These clauses may be included in the representations, warranties, and covenants of a credit agreement to address the requirements on the borrower and the lender to collect and review beneficial ownership information ("BOI") of the borrower and other loan parties under the Corporate Transparency Act and the rules and regulations promulgated thereunder ("CTA"). These clauses include practical guidance and drafting notes. The CTA, 31 USCS § 5336, includes significant changes to the Bank Secrecy Act ("BSA") and U.S. anti-money laundering ("AML") laws. Initially effective January 1, 2024, the CTA imposed extensive new requirements for "reporting companies" to report certain beneficial ownership and control information (referred to as the "BOI Rule") to the Financial Crimes Enforcement Network ("FinCEN"). The information collected under the BOI Rule is being maintained in a registry accessible to FinCEN, certain governmental agencies, and certain financial institutions. The objective of the new changes is to further thwart money laundering and other illegal activity. Filing deadlines under the CTA were enjoined as a result of two preliminary injunctions issued by federal courts. By February 18, 2025, both injunctions had either been stayed or lifted, so that they ceased to be in effect, thereby bringing the CTA back into full force and effect. The CTA's implementing regulations would have required that reporting companies formed prior to January 1, 2024, file their initial BOI reports no later than January 1, 2025. Since that deadline had already passed by the time both injunctions were stayed or lifted on February 18, 2025, FinCEN announced that it was extending the January 1, 2025, filing deadline to March 21, 2025. On February 27, 2025, however, FinCEN announced that it "will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines." FinCEN further announced that it "intends to issue an interim final rule" no later than March 21, 2025, "that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported." On March 26, 2025, FINCEN announced that, "consistent with the Department of the Treasury's March 2, 2025, announcement, it is issuing an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information to FinCEN under the Corporate Transparency Act." FINCEN also announced that it was revising, "the regulatory definition of 'reporting company' to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as 'foreign reporting companies'). FINCEN provided additional clarification, stating, "FinCEN also exempts entities previously known as 'domestic reporting companies' from BOI reporting requirements. Thus, through this interim final rule, all entities created in the United States — including those previously known as 'domestic reporting companies' — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN." In light of the history detailed above, and what can only be described as a turbulent beginning, counsel may want to visit FINCEN's website for further announcements, alerts and press releases regarding the CTA, and any additional changes in the reporting landscape. Since 2018, financial institutions have been required to collect beneficial ownership information on their customers under existing customer due diligence requirements (referred to as the "CDD Rule"). The BOI Rule requires a broader collection of information than the CDD Rule, but more entities are exempt from the requirements of the BOI Rule than the CDD Rule. Notably, among other entities, large operating companies are exempt from being "reporting companies" under the BOI Rule, since they already report information through other requirements. The BOI Rule and the CDD Rule have yet to be synchronized, so financial institutions collect customer beneficial ownership information on large borrowers, but such information does not need to be reported to the FinCEN registry since such borrowers are exempt from the CTA. Due to the existing CDD Rule, most credit agreements from financial institutions already contain provisions for the lender to collect beneficial ownership information from borrowers, guarantors, and affiliates. Under the CTA, however, if the borrower is subject to the reporting rules, the lender may want to include more specific CTA provisions. Financial institutions also need to obtain the consent of a customer in order to access its information in the FinCEN registry. Lenders may even want to access the registry to satisfy the CDD Rule for large borrowers that are exempt from the BOI Rule. These clauses are an example of provisions to include in a credit agreement to more specifically address the requirements of the CTA for a borrower that is a "reporting company" under the CTA, which currently only applies to foreign reporting companies. The credit agreement may already contain other provisions regarding the BSA and AML, so incorporate parts of these clauses as needed. Capitalized terms, sections, number of borrowers, guarantors, and lenders, and whether the loan is syndicated should be conformed to the relevant credit agreement. For further guidance on the CTA, see the Corporate Transparency Act (CTA) Resource Kit. For further guidance on the BSA and AML requirements, see Bank Reporting Requirements under the Bank Secrecy Act and OFAC Sanctions Laws and Bank Secrecy Act, USA PATRIOT Act, AMLA, OFAC, and other Anti-money Laundering / Anti-terrorism Regulations. For a template of a bilateral loan and security agreement, see Loan and Security Agreement (Bilateral). For general representations and warranties clauses for a credit agreement, see Representations and Warranties Clauses (Credit Agreement). For a full listing of key content covering a credit agreement, see Credit Agreement Resource Kit.