Corporate Transparency Act, CFIUS, and Other Real Estate Disclosure Requirements

Description

The CTA, enacted as part of the National Defense Authorization Act for 2021, requires "reporting companies" to report anyone who owns or controls a 25 percent or greater beneficial ownership interest to a registry maintained by FinCEN. FIRRMA, enacted in 2018 with final regs released in 2020, expanded CFIUS' jurisdiction to include real estate transactions involving the purchase, lease, or concession of certain real estate by a foreign person. These new regimes create new hurdles for borrowers, lenders, and their counsel when structuring commercial real estate loans.

The CTA requires reporting companies to disclose detailed information on each control party and requires that customer due diligence performed by lenders be conformed to the CTA. Existing entities must file beneficial ownership statements within two years after the effective date of the regulations. Any material ownership changes must be reported within one year after such changes are made. Sponsors and lenders will need to examine ownership structures for potential CTA disclosures before and after entering a loan.

FIRRMA expanded CFIUS' authority to review "covered real estate transactions," which are defined under FIRRMA as transactions that give a foreign person control over "covered real estate." Understanding those definitions is critical to comply with the statute, which includes extensive notification and reporting requirements and gives CFIUS the ability to prohibit covered real estate transactions unless they fall within certain exemptions.

Listen as our authoritative panel discusses the ramifications of the CTA and FIRRMA for borrower ownership structuring and loan provisions related to borrower compliance in real estate finance deals.