Each portfolio company affiliated with a PE sponsor group will be subject to the CTA disclosure regime unless it falls under one of the statutory exemption categories. The most commonly available exemptions for an operating business will be those for a publicly-traded company and a “large operating company.”
A business entity must satisfy the following three conditions to be exempt as a large operating company:
1. Employ more than 20 persons in the United States on a “full time” or equivalent basis. 2. Generate more than $5 million of annual revenues from U.S. operations. 3. Have a physical location in the United States.
Wholly-owned subsidiaries, regardless of size, of large operating companies, publicly traded companies and certain other CTA-exempted categories of entities are not subject to the FinCEN reporting obligations. All reporting companies formed prior to January 1, 2024, are required to submit their initial CTA ownership report to FinCEN no later than January 1, 2025 (and no earlier than January 1, 2024). The filing deadline for a reporting company formed during the 2024 calendar year is the 90th day following its formation date. Any reporting companies formed after December 31, 2024, are subject to a reporting deadline of 30 days after the date of organization. A reporting company is subject to a continuous obligation to update its information report within 30 days of any changes in information, including any individual who becomes a newly reportable “beneficial owner” and whenever any previously reported beneficial owner’s identifying information changes. Join Bass, Berry & Sims attorneys for a webinar on January 18, 2024, as they provide an overview of the CTA and discuss key areas of focus for private equity sponsors and their investment funds and portfolio companies, including compliance challenges, reporting exceptions and other related considerations.
Click here to register for this complimentary webinar.
8. Voluntary Self-Disclosures in Mergers & Acquisitions under DOJ Safe Harbor Policy; New OIG Guidance BY KRISTIN BOHL, MEREDITH COLLINS & ANGELA HUMPHREYS On October 4, 2023, Deputy Attorney General Lisa Monaco announced in a speech that the Department of Justice (DOJ) had adopted a new Mergers & Acquisitions Safe Harbor Policy (Safe Harbor) focused on encouraging self- disclosure of criminal misconduct discovered during the M&A process. The new DOJ-wide Safe Harbor builds on DOJ’s other efforts this past year to encourage voluntary self-disclosure, such as its Corporate Voluntary Self-Disclosure Policy. The Safe Harbor applies to criminal conduct discovered in bona fide, arms-length M&A transactions, not to misconduct that was otherwise required to be disclosed or already public or known to DOJ. DOJ highlights the benefit of disclosure under the Safe Harbor, focusing on a presumption of a declination of prosecution for acquiring entities who self-disclose. In order to benefit from the Safe Harbor, entities must be aware of certain timelines. The misconduct must be reported to DOJ within six months of the transaction closing date, regardless of whether the conduct at issue was identified pre- or post-closing. Once disclosed, DOJ provides an acquiring company one year from the closing date to cooperate with the investigation and engage in appropriate remediation, restitution and possible disgorgement. Although these timelines form the applicable baseline for the Safe Harbor, DOJ will apply a reasonable analysis based on the circumstances to adjust the timeline as it deems appropriate. The general parameters of the Safe Harbor are established throughout DOJ, and the policy allows each part of the DOJ to tailor its application of the policy to fit its specific enforcement regime. This results in uncertainty for those who may choose to disclose under the Safe Harbor regarding how this policy will actually be implemented in practice.
7 HEALTHCARE PRIVATE EQUITY: 2024 OUTLOOK & TRENDS IN M&A |
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