CTA Reporting Restored: FinCEN Extends Filing Deadlines and Signals Revisions to Reporting Requirements After Federal Court Lifts Stay
On February 18, 2025, the U.S. District Court for the Eastern District of Texas in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex), lifted its order staying the Financial Crimes Enforcement Network (FinCEN) regulations establishing the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA).
Immediately following this action, FinCEN announced an extension of the deadline for companies to file BOI reports by 30 calendar days. Thus, the new deadline for companies to file an initial, updated, and/or corrected BOI report is Friday, March 21, 2025. The March 21 filing deadline applies to:
existing companies that were originally required to file before January 1, 2025;
companies that were formed in 2024 and originally required to file within 60 days of the formation date; and
companies that were formed on or after January 1, 2025, and before February 20, 2025.
Additionally, the U.S. Department of the Treasury has committed, during this 30-day period, to assess its options to further modify deadlines, prioritize reporting for those entities that pose the most significant national security risks, and initiate a process during this year to revise BOI reporting requirements to reduce the burden for lower-risk entities, such as many U.S. small businesses.
The exceptions to the March 21 reporting deadline include the following:
Those companies that were previously given a reporting deadline later than March 21, 2025—e.g., companies having a later reporting deadline because they qualified for certain disaster relief extensions that were previously granted by FinCEN—may file their BOI report based on that later deadline.
Plaintiffs in the case National Small Business United v. Yellen, 5-22-cv-01488 (N.D. Ala.), are not currently required to report BOI information to FinCEN.
FinCEN announced this change in filing requirements through a notice posted on the BOI Beneficial Ownership Information web page titled “Corporate Transparency Act Reporting Requirements Back in Effect with Extended Reporting Deadline; FinCEN Announces Intention to Revise Reporting Rule.
No Business Transaction, No Chapter 93A Claim: Mass. Courts Clarify Requirements
To pursue a Chapter 93A claim, there must be some business, commercial, or transactional relationship between the plaintiff(s) and the defendant(s). An indirect commercial link—such as upstream purchasers—may be sufficient to state a valid claim, but there must ultimately be some commercial connection between the plaintiff and defendant. The District of Massachusetts and the Appeals Court of Massachusetts recently affirmed this requirement in two separate cases.
First, the District of Massachusetts affirmed this principle when it denied plaintiffs’ motion for leave to conduct limited discovery, as the allegations in the complaint only highlighted the commercial relationship between the various defendants and not with the plaintiff. In Courtemanche v. Motorola Sols., Inc., plaintiffs brought a putative class action against a group of commercial defendants and the superintendent of Massachusetts State Police, alleging that the State Police unlawfully recorded conversation content between officers and plaintiffs, and then later used those recordings to pursue criminal charges against plaintiffs. The commercial defendants allegedly willfully assisted the State Police by providing them with intercepting devices and storing the recordings on their servers. The commercial defendants moved to dismiss based on plaintiffs’ failure to allege a business, commercial, or transactional relationship between them and the commercial defendants. Plaintiffs then sought to conduct limited discovery in order to establish such a relationship. The court concluded that allowing even limited discovery on the issue would only amount to an inappropriate fishing expedition and denied the motion.
Shortly thereafter, the Massachusetts Appeals Court reversed portions of a consolidated judgment against defendants for Chapter 93A § 11 violations in Flightlevel Norwood, LLC v. Boston Executive Helicopters, LLC. On appeal, the defendants argued, and the Appeals Court agreed, that the trial judge erred in denying their motion for judgment notwithstanding the verdict. The parties both operated businesses at the Norwood Memorial Airport and subleased adjoining parcels of land with a taxiway running along their common border. At trial, plaintiff argued that defendants engaged in unfair acts to exercise dominion and control over plaintiff’s leasehold to advance defendants’ commercial interests and deliberately interfere with plaintiff’s commercial operations. The Appeals Court reiterated that to maintain a Section 11 claim, a business needs to show more than just being harmed by another business’s unfair practices. Instead, plaintiff must prove that it had a significant business deal with the other company, and that the unfair practices occurred as part of the deal. The Appeals Court thus concluded that Chapter 93A § 11 was inapplicable, as there was no business transaction between the parties.
Delaware Policymakers Act to Enhance Deal Protection Devices and Liability Safe-Harbors and Limit Books and Records Inspections and Litigation Fees
On February 17, 2025, Delaware policymakers, including the governor and a group of bipartisan legislative leaders, took noteworthy steps to enhance transactional certainty and deal protection devices and decrease director, officer, and controlling stockholder liability and related litigation expenses and fees. First, in Senate Bill 21, the legislature has proposed amendments to the Delaware General Corporation Law (DGCL) that would increase protections for directors, officers, and controlling stockholders from fiduciary duty claims and liability when using certain cleansing procedures and decrease stockholders’ access to corporate books and records (Proposed Amendments). Second, in Senate Concurrent Resolution 17, the legislature has requested that the Council of the Corporation Law Section of the Delaware State Bar Association (Council) prepare a report with recommendations for legislative action regarding incentives and caps related to fees granted by the Delaware courts to attorneys representing plaintiff-stockholders (Requested Report). Although the Proposed Amendments remain subject to approval by the Delaware legislature and governor, they are immediately relevant to all companies and investors, and particularly those considering whether to incorporate or remain in Delaware. Overview of the Proposed Amendments
The Proposed Amendments would significantly modify Sections 144 and 220 of the DGCL. These changes are intended to counteract case law developments in the Delaware litigation and transactional landscape over the past decade and provide all stakeholders with greater clarity and transactional certainty going forward. Specifically, amended Section 144 would codify variations on the deal protection devices used for cleansing breach of fiduciary duty claims by approval of disinterested stockholders (under Corwin v. KKR Financial Holdings LLC, 125 A.3d 304 (Del. 2015), in the absence of a conflicted controlling stockholder transaction) and by approval of both an independent director committee and unaffiliated stockholders (under Kahn v. M & F Worldwide Corp., 88 A.3d 635 (2014), as a conflicted controlling stockholder transaction). Amended Section 220 would largely restrict the inspection of records other than specified formal corporate records. Each of these topics has figured prominently in the recent discourse regarding Delaware’s prominence as a corporate home and source of corporate law and the possibility of a shift toward other jurisdictions. Delaware now appears poised to quickly respond to that discourse by adopting the state-of-the-art Proposed Amendments which will offer corporate constituents unparalleled clarity and transactional certainty moving forward.
Proposed Amendments to Section 144
Section 144 currently provides a limited safe harbor from voidness of interested transactions. The Proposed Amendments to Section 144 would prevent equitable relief, damages, or other sanctions against directors, officers, and controlling stockholders in conflicted transactions under certain circumstances. Amended Section 144 offers cleansing of fiduciary duty claims and liability in three different scenarios: (1) conflicted transactions without a conflicted controlling stockholder (Non-Controller Transactions); (2) conflicted controlling stockholder transactions other than a going-private transaction (Controller Transaction); and (3) conflicted controlling stockholder going-private transaction (Going Private Transaction).
Similar to Corwin and MFW, amended Section 144 would permit fiduciary duty claims related to Non-Controller Transactions to be cleansed by disinterested stockholder approval, while fiduciary duty claims related to Going Private Transactions would require approval by both an independent director committee and disinterested stockholders. In a noteworthy shift, under amended Section 144, claims and liability related to Controller Transactions could be cleansed by disinterested director or independent committee approval instead of both. However, in another notable shift, the requirements for utilizing these deal protection devices under amended Section 144 would be less stringent than under existing law in a few important ways, including that under amended Section 144, (i) a cleansing procedure need not be in place from the outset, (ii) disinterested stockholder approval is determined on a votes cast basis, (iii) an independent committee must only be majority composed by independent directors, (iv) the independence of public company directors is presumably satisfied by applicable stock exchange standards, and (v) Controller Transactions may be cleansed by only one of disinterested stockholder or independent committee approval. Amended Section 144 would also address the critical threshold matter of how a controlling stockholder is defined, by prescribing a standard that is higher and narrower than at Delaware common law, requiring either majority voting power, or one-third voting power in director elections and power to exercise managerial authority over the corporation.
Proposed Amendments to Section 220
Section 220 currently provides stockholders with rights to demand inspection of corporate books and records related to a proper purpose as a stockholder and the right to petition the Delaware Court of Chancery to compel such an inspection based on a credible basis for the inspection. As amended, Section 220 would retain that general framework but would generally limit inspections to specified formal books and records and restrict the stockholder’s ability to obtain redress from the court. Amended Section 220 would also prevent the court from ordering inspection of other corporate records such as informal records and director texts and emails, unless the corporation failed to maintain stockholder meeting minutes and consents for the past three years, board meeting minutes and actions, and financial statements for the past three years (and, if the corporation has publicly listed stock, director and officer independence questionnaires). Amended Section 220 would also increase the standards applicable to an inspection petition, by requiring (i) the books and records to be specifically related to the purpose and (ii) the stockholder to describe its purpose and the demanded books and records with reasonable particularity. By limiting the scope of books and records available for inspection under Section 220, the Proposed Amendments would also clarify and generally limit the books and records available pursuant to a director’s inspection demand.
Requested Report regarding Litigation Fees
In the Requested Report, the legislature has asked the Council to report on potentially appropriate legislative action regarding attorneys’ fees in litigation, expressly including incentives and caps on those fees. The legislature’s request acknowledges the difficulty and importance of striking the right balance in this sensitive area, while suggesting that the legislature may be inclined to impose limits on corporate litigation fees. This is a topic that has also factored into the discourse over whether companies intend to remain incorporated in Delaware. Although the Proposed Amendments were not subjected to the Council’s drafting and review process which has applied as a matter of course to DGCL amendments for more than 50 years, the Requested Report may indicate the legislature’s desire for this matter to run the Council’s typical gamut involving law firms spanning the spectrum of clients and interests. If the Requested Report does lead to legislative caps on attorneys’ fees in corporate litigation, then that would add to the insulating effect of the Proposed Amendments and further reduce companies’ exposure to litigation expenses.
Outlook
Delaware has responded to critics aggressively in a way that may have lasting effects on the corporate, M&A, and litigation landscape. We view these legislative actions as important developments for any board, management team, or investor and in any conversation regarding whether to incorporate, remain, or invest in Delaware or another jurisdiction. At a minimum, the Proposed Amendments would clarify a path forward for recordkeeping and conflict transaction authorization, while emphasizing the benefits of good corporate hygiene, the inclusion of independent directors, and the presence of empowered board committees. From the perspective of the corporate franchise, this demonstrates Delaware’s commitment to flexibility, an enabling corporate statute, responsiveness to corporate constituents, and legal certainty, and these are all factors that have been identified as key elements in the conversation over Delaware’s continued global leadership in corporate law. However, the Proposed Amendments and the Requested Report are not yet law; we anticipate that the precise implications will continue to play out over the coming months and years and will be monitoring for further developments.
View Senate Bill 21
View Senate Concurrent Resolution 17
FinCen Announces New Deadline for BOI Reporting Under Corporate Transparency Act
The Financial Crimes Enforcement Network of the U.S. Treasury Department (FinCEN) announced a new deadline for most companies covered by the Corporate Transparency Act (CTA). Such reporting companies now must file Beneficial Ownership Information (BOI) reports no later than March 21, 2025.
FinCEN made its announcement on February 18, 2025, in response to a decision by a federal judge in the U.S. District Court for the Eastern District of Texas lifting the preliminary injunction in Smith v. United States Department of the Treasury. That decision removed the last judicial impediment to the enforcement of the CTA. With limited exceptions for certain reporting companies qualifying for an extension due to disaster relief or who may be subject to an exception as a plaintiff in National Small Business United v. Yellen, reporting companies should file their BOI reports no later than March 21, 2025. As of today, the deadline appears firm and should be considered binding. However, in its announcement, FinCEN left itself the option of extending the deadline if it determines an extension is warranted, indicating that it would provide an update of any modification of the March 21, 2025, deadline prior to that date, recognizing companies impacted by this announcement may need additional time to comply with their BOI reporting obligations.
In light of the March 21, 2025, time frame, companies should take heed of this decision and make every effort to meet this reporting deadline.
BOI is Back: Corporate Transparency Act Reporting Requirements Reinstated
Amid a series of ongoing legal battles, the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) have been reinstated. In light of the U.S. Supreme Court’s January 23, 2025 order in McHenry v. Texas Top Cop Shop Inc., which granted the government’s request for a stay of a nationwide injunction in a separate case challenging the BOI reporting requirements, on February 17, 2025, the U.S. District Court for the Eastern District of Texas granted the government’s motion to stay the preliminary injunction issued in Smith v. United States Department of the Treasury. As a result, U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) is no longer prohibited from enforcing the CTA’s BOI reporting requirements, and reporting companies’ compliance obligations have resumed. This ruling is pending an appeal to the U.S. Court of Appeals for the Fifth Circuit.
FinCEN has announced a 30-day deadline extension for reporting companies. The new deadline for the majority of reporting companies to file an initial, updated, and/or corrected BOI report is March 21, 2025. FinCEN has also indicated that it will assess the need for further modifications to the reporting deadlines during this 30-day extension period, with a focus on lower-risk entities.
In parallel, BOI reporting requirements are receiving legislative attention. The Protect Small Business from Excessive Paperwork Act of 2025 unanimously passed the U.S. House of Representatives and a companion bill is awaiting action in the Senate. If enacted, reporting companies formed before January 1, 2025 will have until January 1, 2026 to comply with the BOI reporting requirements.
Reporting companies must ensure they are prepared to meet the March 21, 2025 filing deadline. While further adjustments may be forthcoming, companies are advised to remain proactive in their compliance efforts.
Corporate Transparency Act Back in Effect with March 21 Deadline
The Financial Crimes Enforcement Network (FinCEN) issued a notice confirming that beneficial ownership information (BOI) reporting rules are back in effect following a February 18, 2025, ruling in Smith, et al. v. U.S. Department of the Treasury, et al. in the Eastern District of Texas. The Smith Court lifted its injunction following the January 23, 2025, Supreme Court decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al., which we discussed in a previous alert.
For most reporting companies,[1] the deadline to file a new, updated, or corrected BOI report is now March 21, 2025. However, FinCEN’s notice states that the agency will use the 30-day period before the deadline to “assess its options to further modify deadlines, while prioritizing reporting for those entities that post the most significant security risks.” According to the notice, FinCEN may also work toward revising the BOI reporting rules to “reduce the burden for lower-risk entities.”
Recent legislation unanimously passed in the U.S. House of Representatives exacerbates the lack of certainty around the new deadline. H.R. 736, Protect Small Businesses From Excessive Paperwork Act of 2025, which is now before the Senate, would extend the deadline for filing BOI reports to January 1, 2026, for companies formed before January 1, 2024.
The Corporate Transparency Act (CTA) contains civil and criminal penalties for noncompliance. Reporting companies that take a “wait and see” approach between now and March 21, 2025, should be prepared to file quickly as the deadline approaches. Given the compressed timeframe and the single deadline for the vast majority of companies, there may be a significant demand on FinCEN’s online portal as we approach March 21.
CTA in the Courts
For those keeping score on the CTA litigation front, both cases mentioned above are currently pending in the U.S. Court of Appeals for the Fifth Circuit, with oral arguments scheduled in Texas Top Cop Shop for April 1, 2025. Other cases on appeal to circuit courts include:
National Small Business United v. Yellen — The U.S. District Court for the Northern District of Alabama issued an injunction preventing enforcement of the CTA against the named plaintiffs. Oral arguments were held on September 27, 2024, in the government’s appeal to the U.S. Court of Appeals for the Eleventh Circuit. No decision has been issued.
Firestone et al v. Yellen et al. — The U.S. District Court for the District of Oregon denied the plaintiffs’ request for a preliminary injunction, and the plaintiffs appealed the decision to the U.S. Court of Appeals for the Ninth Circuit.
Community Associations Institute et al v. U.S. Department of the Treasury et al. — The U.S. District Court for the Eastern District of Virginia denied the plaintiffs’ request for a preliminary injunction, and the plaintiffs appealed the decision to the U.S. Court of Appeals for the Fourth Circuit.
In a noteworthy decision on February 14, 2025, in Boyle v. Bessent, et al., the U.S. District Court for the District of Maine granted the government’s motion for summary judgment, finding the CTA to be a valid exercise of congressional authority.
We will continue to monitor this situation closely and provide updates as needed.
ENDNOTES
[1] Companies that were previously granted an extended deadline later than March 21, 2025, must file by such later deadline. In addition, the injunction in favor of the plaintiffs in National Small Business United v. Yellen remains unaffected by the latest ruling. Companies formed after February 19, 2025, must file within 30 days of formation.
Corporate Transparency Act Returns: New Deadline March 21, 2025
On February 17, 2025, the Eastern District of Texas in Smith v. United States Department of the Treasury lifted the last remaining nationwide preliminary injunction on enforcement of the filing deadline under the Corporate Transparency Act (CTA) in light of the Supreme Court’s stay of the injunction in Texas Top Cop Shop, Inc., et al. v. Merrick Garland, et al., earlier this year. Following the ruling, the Treasury Department stated that it would extend the filing deadline to March 21, 2025.
With the deadline back in effect, newly formed entities will also need to file within 30 days of formation. In addition, any changes to filings already made will need to be updated within 30 days of the change (if, for example, ownership or control of the entity changes, or if a beneficial owner moves to a new residential address).
The Financial Crimes Enforcement Network (FinCEN), tasked with enforcing the CTA, advised that it is undertaking a review of the CTA to determine if lower-risk categories of entities should be excluded from the reach of the filing requirements. FinCEN will make an initial statement on that review prior to the March 21, 2025 deadline. However, unless and until FinCEN makes changes in the applicability of the requirement, all companies subject to the CTA should treat the deadline as enforceable.
FinCEN also announced that it will initiate a longer process this year to revise the reporting rule to reduce the filing burden for lower-risk entities, but it’s currently unclear as to what those modifications might entail.
Passed in the first Trump Administration but implemented during the Biden presidency, the CTA — an anti-money laundering law designed to combat terrorist financing, seize proceeds of drug trafficking, and root out illicit assets of sanctioned parties and foreign criminals in the U.S. — has faced legal challenges around the country, many of which are ongoing despite the lifting of the preliminary injunctions. In addition to district court proceedings, appeals are currently pending before the Fourth, Fifth, Ninth, and Eleventh Circuits.
Please note that if you file or have already filed and the law is ultimately found unconstitutional or otherwise overturned or rescinded, you will not be under any continuing obligation regarding that filing.
It Is More Than Conceivable That The Court Of Chancery Would Correct Statutory Law
The most distinguishing feature of Delaware law is that it is interpreted and applied by a court of equity. A recent post by Professor Stephen Bainbridge illustrates this point:
The Delaware Supreme Court held in Schnell v. Chris-Craft Industries, Inc., that “inequitable action does not become permissible simply because it is legally possible.” This means that even if a corporate action complies with the literal terms of a statute, Delaware courts can intervene if the action is deemed unfair or inequitable. Schnell thus demonstrates that Delaware courts will not allow statutory formalism to justify unfair corporate behavior. Equity acts as a safeguard against directors exploiting statutory provisions to the detriment of shareholders. The decision remains a cornerstone of Delaware’s approach to corporate governance, ensuring that statutory compliance is always subject to equitable scrutiny. It’s at least conceivable that an activist judge could invoke Schnell to impose liability in a particular case even though the technical requirements of SB 21 were satisfied. (See, e.g., the discussion above of Fliegler [v. Lawrence. 361 A.2d 218 (Del.1976)].)
This understanding of equity versus law goes all the way back to none other than Aristotle. See Nicomachean Ethics Book V, Section 10. Thus, the risk that the Court of Chancery would “correct” statutory law is more than conceivable. It is entirely plausible given the Court’s role as a court of equity.
The Nuts and Bolts of a Chapter 11 Plan
Editors’ Note: Most business people, finance professionals, and even attorneys have no more than a passing familiarity with bankruptcy. If your company is (or you, personally are) having financial difficulties, then bankruptcy may be an option (although there are other options). A business and its owner/senior executives often have two types of bankruptcy available to them: Chapter 7 and Chapter 11. Chapter 13 is also available to individuals but there are limits that apply that commonly make the option unavailable to business owners.
The word ‘Chapter’ refers to how the US Bankruptcy Code is organized: Chapter 7 is titled “Liquidation” and Chapter 11 is titled “Reorganization.” The title of Chapter 11 is, however, misleading because one (a company or a person) who files Chapter 11 can use it to reorganize or liquidate. In either case, a ‘successful’ Chapter 11 usually — but not always — involves the confirmation of a Chapter 11 plan.
Chapter 11 bankruptcy serves as a vital mechanism for businesses aiming to restructure their debts and continue operations. This article delves into the intricacies of Chapter 11 plans, highlighting the process, key participants, and essential elements for successful reorganization.
What Is a Chapter 11 Plan?
A Chapter 11 plan is essentially a contract — a legally binding document that dictates how a company will distribute its assets and/or equity in itself to satisfy its financial obligations. Once approved by a bankruptcy court, the plan dictates how creditors are repaid and how the company will proceed financially.
Evan Hill, a partner at Skadden, Arps, Slate, Meagher & Flom, describes it as a roadmap that lays out how creditors will be treated and how the company will be structured post-bankruptcy. Once confirmed by the court, the plan becomes binding on all parties involved.
Initially, the debtor (the business filing for bankruptcy) has the exclusive right to propose a plan for the first 120 days after filing. This exclusivity period can be extended or challenged by creditors if they believe the debtor isn’t making sufficient progress.
Key Players in a Chapter 11 Case
There can be many parties involved in a Chapter 11 plan, often with different or competing motivations:
The Debtor: The company (or individual) filing for bankruptcy, aiming to restructure debt and continue operations or to sell its assets for the highest price possible to repay creditors as much as possible.
Secured Creditors: Lenders with collateral, such as banks holding a mortgage.
Unsecured Creditors: Suppliers, vendors, or litigation claimants without collateral. Their interests vary widely depending on their relationship with the debtor.
Equity Holders: Shareholders who are at the bottom of the distribution hierarchy.
The US Trustee: A branch of the US Department of Justice ensuring the process is fair and compliant.
The Bankruptcy Judge: The final authority who confirms or denies the Chapter 11 plan.
David Wood, a partner at Marshack Hays Wood, notes that secured creditors usually just want to get paid, while unsecured creditors may have business interests beyond just repayment.
Creating a Chapter 11 Plan
Some companies enter bankruptcy with a pre-negotiated plan in place, which can expedite the process. Others develop their plans during the bankruptcy case through negotiations with creditors.
Matt Christensen, a partner at Johnson May, explains that the more a debtor can pre-negotiate with major creditors, the smoother the process tends to be. Otherwise, the debtor may face competing plans from creditors who have their own ideas about how the company should be restructured. In smaller cases, debtors often draft a plan after filing, once they have a clearer picture of their financials and creditor positions.
Key Requirements for Plan Confirmation
To be confirmed by the court, a Chapter 11 plan must meet several legal requirements under Section 1129 of the Bankruptcy Code:
Feasibility: The plan must be realistic and demonstrate that the reorganized company can survive.
Good Faith: The plan must be proposed in a fair and honest manner.
Best Interests Test: Creditors must receive at least as much as they would if the company were liquidated under Chapter 7.
Impaired Class Acceptance: At least one class of impaired creditors must vote in favor of the plan.
Cramdown Provisions: If not all creditors agree, the plan can still be confirmed if it meets certain fairness criteria.
Christensen notes that Subchapter V of Chapter 11, which smaller businesses can opt into, have fewer hurdles and allow for debtor-friendly provisions like the elimination of the absolute priority rule.
The Role of the Disclosure Statement
In traditional Chapter 11 cases (but not in Subchapter V cases), the court must approve a disclosure statement before a plan can move to a vote. In some cases, debtors seek conditional approval to streamline the process. A disclosure statement, which accompanies the Chapter 11 plan, provides detailed information for creditors. Creditors and other interested parties need to understand what they’re voting on. A disclosure statement lays out the financial situation, how debts will be treated, and why the plan is viable.
Voting and Confirmation Process
Once the disclosure statement is approved, creditors vote on the plan.
Acceptance: A class of creditors approves if two-thirds in amount and more than half in number vote in favor.
Cramdown: If certain classes object, the court can confirm the plan anyway, provided it is fair and equitable.
Wood emphasizes that this is where negotiation skills come into play. The process of building consensus can go more smoothly with more buy-in upfront.
Reorganization vs. Liquidation Plans
Not all Chapter 11 cases aim to keep a company operating. Sometimes, a debtor files a liquidation plan, which outlines how assets will be sold to maximize creditor recovery. Hill points out that liquidation plans don’t typically grant the debtor a discharge from debts, making them different from reorganization plans.
Understanding Key Legal and Financial Considerations in Chapter 11
1. Debtor-in-Possession (DIP)
In Chapter 11 cases, the debtor often continues to operate the business as a ‘debtor-in-possession’ (DIP). This means that the debtor retains control of assets and business operations during the bankruptcy process, without the appointment of a trustee. The DIP has fiduciary duties to creditors and must operate within the confines of the Bankruptcy Code.
2. Automatic Stay
Upon filing for Chapter 11, an automatic stay is enacted, which halts all collection activities, foreclosures, and lawsuits against the debtor. This provision provides the debtor with temporary relief from creditors, allowing time to propose a reorganization plan.
3. Priority Claims
Certain creditors have priority claims under the Bankruptcy Code, meaning they are entitled to be paid before general unsecured creditors. Priority claims include certain tax obligations, employee wages, and administrative expenses incurred during the bankruptcy process.
4. DIP Financing
Businesses in Chapter 11 may require financing to continue operations during the bankruptcy process. DIP financing allows debtors to secure new loans, often with court approval, giving these lenders priority repayment status.
Final Thoughts
Although the confirmation process commonly takes place long after the filing of the Chapter 11 case, it is typically critical to consider the strategy for confirmation before filing the case.
To learn more about this topic view The Nuts & Bolts of Chapter 11 (Series I) / The Nuts & Bolts of a Chapter 11 Plan. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about Chapter 11.
This article was originally published on here.
©2025. DailyDACTM, LLC. This article is subject to the disclaimers found here.
CTA UPDATE: US District Court Reinstates Reporting Requirement; FinCEN Grants 30-Day Filing Extension
Go-To Guide:
On Feb. 18, 2025, the U.S. District Court for the Eastern District of Texas granted the government’s motion to stay relief in Smith v. U.S. Department of the Treasury, thereby lifting the injunction against the Corporate Transparency Act (CTA) that had been in place in that case.
As a result, FinCEN confirmed that beneficial ownership information (BOI) reporting requirements under the CTA are once again back in effect, subject to a 30-day filing extension.
Most entities will have a reporting deadline of March 21, 2025 (except for reporting companies with later reporting deadlines under existing guidelines).
The CTA’s status has shifted multiple times1 since Dec. 3, 2024, when a Texas district court in Texas Top Cop Shop, Inc. v. McHenry (formerly Texas Top Cop Shop, Inc. v. Garland) preliminarily enjoined the CTA and its BOI reporting rule (Reporting Rule) on a nationwide basis.
On Jan. 7, 2025, a second federal judge of the U.S. District Court for the Eastern District of Texas (the District Court) ordered preliminary relief barring CTA enforcement in Smith v. U.S. Department of the Treasury.2 Then, notwithstanding the SCOTUS Order staying the injunction in Texas Top Cop Shop, on Jan. 24, 2025, FinCEN confirmed that reporting companies were not required to file BOI Reports with FinCEN due to the separate nationwide relief entered in Smith (and while the order in Smith remained in effect). On Feb. 5, 2025, the government appealed the ruling in Smith to the U.S. Court of Appeals for the Fifth Circuit (the Fifth Circuit) and asked the District Court to stay relief pending that appeal.
CTA Reporting Requirements Back in Effect
On Feb. 18, 2025, the District Court in Smith granted a stay of its preliminary injunction pending appeal, thereby reinstating BOI reporting requirements once again. On Feb. 19, 2025, FinCEN issued guidance on its website to reflect this update and to announce that companies have 30 days to submit BOI reports:
With the February 18, 2025, decision by the U.S. District Court for the Eastern District of Texas in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.), beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are once again back in effect. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.
New Filing Deadlines
Most reporting companies will be required to file BOI reports no later than March 21, 2025, as follows:
The new deadline to file an initial, updated, and/or corrected BOI report is generally now March 21, 2025.
Companies that were previously given a reporting deadline later than the March 21, 2025, deadline must file their initial BOI report by that later deadline (i.e., companies that qualify for certain disaster relief extensions and companies formed on or after Feb. 20, 2025).
Looking Ahead
In its guidance, FinCEN indicates that it will assess its options to further modify deadlines and initiate a process this year to revise the Reporting Rule to reduce burden for lower-risk entities, including many U.S. small businesses. How this will impact BOI reporting requirements remains to be seen.
Expedited oral arguments for the Fifth Circuit appeal in Texas Top Cop Shop are set for March 25, 2025. Unless the courts or Congress3 provide further relief, reporting companies should prepare to comply with the deadlines outlined above. Additionally, reporting companies should stay updated on FinCEN announcements, as further adjustments to reporting deadlines could be issued within the next 30 days.
1 On Dec. 3, 2024, the CTA and its BOI reporting rule were preliminary enjoined on a nationwide basis, approximately four weeks ahead of a key Jan. 1, 2025, deadline. FinCEN appealed that ruling, and on Dec. 23, 2024, a motions panel of the U.S. Court of Appeal for the Fifth Circuit stayed the injunction, allowing the CTA to go back into effect. Three days later, on Dec. 26, 2024, a merits panel of the Fifth Circuit vacated the motion panel’s stay, effectively reinstating the nationwide preliminary injunction against the CTA and the Reporting Rule. On Dec. 31, 2024, the government filed an emergency application with the U.S. Supreme Court to stay that preliminary injunction. On Jan. 23, 2025, the Supreme Court granted that application (the SCOTUS Order), staying the nationwide preliminary injunction in Texas Top Cop Shop, Inc. v. McHenry. McHenry v. Texas Top Cop Shop, Inc., No. 24A653, 2025 WL 272062 (U.S. Jan. 23, 2025).
2 See Smith v. United States Dep’t of the Treasury, No. 6:24-CV-336-JDK, 2025 WL 41924 (E.D. Tex. Jan. 7, 2025).
3 On Feb. 10, 2025, the House of Representatives unanimously passed the Protect Small Businesses from Excessive Paperwork Act (H.R. 736, 119th Cong. (2025)). The bill has moved to the Senate for consideration. If enacted, the bill will extend the reporting deadline for entities that qualify as “a small business concern” to Jan. 1, 2026.
Corporate Risk Management Basics: What Every Business Should Know
Introduction
Risk management is a critical component of any successful business strategy. It involves identifying, assessing, and mitigating potential threats that could adversely affect an organization’s operations, assets, or reputation. These risks can be financial, operational, legal, or strategic in nature. By implementing effective risk management practices, businesses can safeguard their interests and ensure long-term stability.
What Is Risk Management?
Risk management is the systematic process of identifying potential risks, evaluating their likelihood and impact, and developing strategies to address them. This proactive approach enables businesses to minimize potential losses and capitalize on opportunities. As Brenda Wells, an expert in risk management emphasizes, risk management isn’t just about reacting to problems; it’s about planning ahead to prevent them.
Major Focus Areas in Risk Management
Risk management involves multiple dimensions, each critical to the overall success and resilience of an organization. Addressing these areas holistically can help businesses maintain operational efficiency and financial security. Effective risk management encompasses several key areas:
Operational Risks: These pertain to disruptions in day-to-day business activities, such as supply chain interruptions, equipment failures, or human errors. Managing operational risks involves implementing robust internal controls and contingency plans to maintain business continuity.
Financial Risks: These involve uncertainties related to financial markets, including interest rate fluctuations, credit risks, and liquidity challenges. Businesses must monitor their financial exposures and employ strategies like diversification and hedging to mitigate these risks.
Legal and Compliance Risks: Organizations must adhere to various laws and regulations pertinent to their industry. Non-compliance can lead to legal penalties and reputational damage. Regular compliance audits and staying updated with regulatory changes are essential practices.
Cybersecurity Risks: In today’s digital age, cyber threats such as data breaches and theft of intellectual property (IP) are prevalent. Alex Sharpe, a cybersecurity expert, warns that many businesses underestimate their exposure to cyber risks, but a single incident can cripple a company financially and erode customer trust. Implementing robust cybersecurity measures and employee training can mitigate these risks. In today’s hyper-connected world, we can no longer only look at ourselves. We also need to look at third parties we depend upon.
Reputational Risks: These arise from negative public perceptions due to poor customer service, product failures, or unethical practices. Maintaining transparency, ethical operations, and effective communication strategies are vital to protecting a company’s reputation.
Key Legal and Financial Terms in Risk Management
Understanding specific legal and financial terms is crucial for effective risk management. These terms often occur when discussing mitigating risks and ensuring regulatory compliance:
Derivatives: Financial instruments whose value is derived from underlying assets like stocks, bonds, or commodities. They are commonly used for hedging financial risks.
Directors and Officers (D&O) Liability Insurance: This insurance provides coverage to company leaders against claims arising from alleged wrongful acts in their managerial capacity.
Third-Party Risk Management (TPRM): Involves assessing and managing risks associated with external entities that a business engages with, such as suppliers or service providers.
Compliance Program: A structured set of internal policies and procedures implemented by a company to ensure adherence to laws, regulations, and ethical standards. A robust compliance program helps in identifying regulatory risks and implementing measures to mitigate them.
The Role of Insurance in Risk Management
Insurance is a fundamental tool in transferring risk. Sue Myers, a seasoned expert in risk and insurance, emphasizes the need for strategic planning in risk management. By obtaining appropriate insurance coverage, businesses can protect themselves against significant financial losses resulting from unforeseen events. However, as David Pooser points out, “insurance transfers risk, but it doesn’t eliminate it. A solid risk management plan includes prevention and mitigation strategies.” Therefore, while insurance provides a safety net, it should be complemented with proactive risk mitigation efforts.
Selecting the Right Insurance Agent/Broker
An insurance agent or broker plays a pivotal role in a company’s risk management strategy. A knowledgeable agent can help identify potential coverage gaps and ensure that the business is adequately protected. Reid Peterson advises business owners to seek agents who possess a deep understanding of their specific industry and can offer tailored recommendations. He encourages businesses to think of their insurance agent as part of their advisory team, just like a lawyer or accountant.
Building a Comprehensive Business Advisory Team
A multidisciplinary advisory team enhances a company’s ability to manage risks effectively. Key members should include:
Attorney: Handles legal matters, ensures regulatory compliance, and manages potential litigation.
Accountant: Oversees financial health, conducts audits, and advises on tax-related issues.
Insurance Agent: Assesses risk exposures and recommends appropriate insurance solutions.
Cybersecurity Expert: Develops strategies to protect against digital threats and ensures data integrity.
This collaborative approach ensures that all potential risks are identified and managed comprehensively.
Common Risk Management Pitfalls
Businesses often encounter challenges in their risk management efforts. Common risk management pitfalls include:
Neglecting Regular Updates: As businesses evolve, so do their risk exposures. It’s crucial to regularly review and update risk management strategies and insurance coverages to align with current operations.
Overlooking Cybersecurity: With the increasing reliance on digital systems, neglecting cybersecurity can leave businesses vulnerable to costly data breaches.
Lack of Crisis Management Plans: Many companies fail to prepare for potential crises, which can lead to disorganized responses and increased financial losses.
Failure to Review Contracts: Poorly drafted contracts can expose businesses to unnecessary legal and financial risks. Having legal professionals review agreements can prevent future disputes.
Final Thoughts
Risk management is an essential part of running a successful business. By taking a proactive approach — identifying risks, developing mitigation strategies, and working with the right advisors — businesses can protect themselves from costly disruptions. As Brenda Wells emphasizes, risk management isn’t about avoiding all risks — it’s about being prepared for them.
To learn more about this topic view Corporate Risk Management / Corporate Risk Management Basics. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about managing business risks.
This article was originally published here.
©2025. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
The Return of the CTA: FinCEN Confirms that Beneficial Ownership Information Reporting Requirements are Back in Effect with a New Deadline of March 21, 2025
On February 19, 2025, the Financial Crimes Enforcement Network (“FinCEN”) announced that beneficial ownership information reporting requirements under the Corporate Transparency Act (“CTA”) are back in effect with a new deadline of March 21, 2025 for most reporting companies. This announcement came in response to the decision made on February 17, 2025 by the U.S. District for the Eastern District of Texas in Smith v. U.S. Department of the Treasury, No. 6:24-cv-336-JDK, 2025 WL 41924 (E.D. Tex.) to stay (lift) the preliminary injunction on enforcement of the CTA.
In addition to the deadline extension of 30 calendar days from February 19, 2025, FinCEN notably stated that “in keeping with Treasury’s commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.”
FinCEN did not provide any further details regarding how or when the BOI reporting rule would be revised. However, FinCEN did note that it would provide an update before the March 21, 2025 deadline “of any further modification of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided.” The full notice from FinCEN can be read here: FinCEN Notice, FIN-2025-CTA1, 2/18/2025.
Meanwhile, in Congress, several bills have been proposed that, if signed into law, would push the reporting deadline out still further. On February 10, 2025, the Protect Small Business from Excessive Paperwork Act of 2025, H.R. 736, co-lead by U.S. Representatives Zachary Nunn (R-IA), Sharice Davids (D-KS), Tom Emmer (R-MN) and Don Davis (D-NC), unanimously passed by the House. This bill, if passed into law, would modify the deadline for filing of initial BOI reports by reporting companies that existed before January 1, 2024 to not later than Jan. 1, 2026. On February 12, 2025, the Protect Small Business Excessive Paperwork Act of 2025 – companion legislation in the Senate that would likewise extend the filing deadline until January 1, 2026 – was introduced by U.S. Senators Katie Britt (R-AL) and Tim Scott (R-SC) and referred to the Committee on Banking, Housing and Urban Affairs.
Additionally, on January 15, 2025, another bill – the Repealing Big Brother Overreach Act – was introduced by U.S. Senator Tommy Tuberville (R-AL) in the Senate and re-introduced by U.S. Representative Warren Davidson (R-OH) in the House. This bill, if passed into law, would repeal the CTA entirely.
As noted above and in previous posts, the CTA landscape remains volatile. The Sheppard Mullin CTA Task Force will continue to monitor the various court cases, both in Texas and in other jurisdictions around the country, as well as the legislative bills that are making their way through the House and Senate, and will continue to provide updates as they become available. In the meantime, reporting companies are advised to comply with the law as it currently stands and, barring any further updates from FinCEN, should being filing BOI reports again if they have not already done so.
For background information about the CTA and its reporting requirements (including answers to several frequently asked questions), please refer to our previous blog post, dated November 5, 2024. For more information about the history of the CTA litigation mentioned above, please refer to our blog post, dated January 3, 2025.
Additional information about the CTA requirements can be found at the following FinCEN websites:
FinCEN’s website regarding beneficial ownership information
FinCEN’s Small Entity Compliance Guide
FinCEN’s BOIR Frequently Asked Questions (https://www.fincen.gov/boi-faqs)