The Financial Crimes Enforcement Network (FinCEN) requires specific entities to report beneficial ownership information (BOI) under the Corporate Transparency Act (CTA). A key aspect of these reporting rules is identifying individuals with substantial control over the reporting company. Below, we’ll break this down in plain terms to help you stay compliant.
Substantial control refers to the authority or influence an individual has over a company’s key decisions. FinCEN provides clear guidance on what qualifies as substantial control:
Substantial control includes individuals serving as:
President
Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
Chief Operating Officer (COO)
General Counsel
Any other officer performing similar functions
Beyond formal titles, substantial control applies to individuals who:
Direct Company Decisions:
Approve or veto board decisions or leadership actions.
Influence strategic initiatives such as mergers, acquisitions, or major investments.
Control Financial Activities:
Manage significant financial transactions, such as treasury operations.
Set budgets or financial allocations for major projects.
Oversee Operations:
Lead core business areas such as procurement, manufacturing, logistics, or supply chain policies.
Regulate Legal and Compliance Matters:
Ensure the company adheres to legal or regulatory obligations.
Approve or manage compliance-related agreements.
Make Workforce Decisions:
Determine hiring, firing, compensation, or workforce restructuring strategies.
Shape Business Strategy:
Approve key market expansion plans or partnership agreements.
Manage Technology or Intellectual Property:
Control proprietary technology, intellectual property, or critical infrastructure.
Set Risk Policies:
Oversee the company’s risk management policies or insurance strategies.
Sometimes, individuals without formal titles may still fall under the substantial control category if they:
Act as advisers or consultants with actual decision-making authority.
Hold special voting rights as equity holders.
Influence decisions typically reserved for executives.
Reporting substantial control ensures transparency in ownership and control structures. Failing to report accurate information may result in compliance violations and significant penalties.
To meet FinCEN’s BOI reporting requirements:
Identify all individuals exercising substantial control over your company.
Ensure their information is reported accurately, including:
Name
Date of birth
Address
Unique identifying number from a government-issued document (e.g., passport or driver’s license).
Regularly review and update your company’s BOI filings to reflect changes in control.
For additional guidance, visit FinCEN’s Beneficial Ownership Information Reporting Rule Fact Sheet.
If you’re still unsure or have questions about compliance, don't hesitate to get in touch with our team by clicking here. We’re here to help you navigate these requirements with ease.