THIS ISSUE'S HEADLINES

Don’t Delay! Corporate Transparency Act Filing Deadline is Fast Approaching for Entities Established Prior to January 1, 2024

New Federal Trade Commission “Click To Cancel” Rule Impacts a Wide Range of Auto-Renewal Products and Services

Equity Financing Strategies: Key Differences of Rule 506(B) vs. Rule 506(C)


DON’T DELAY! CORPORATE TRANSPARENCY ACT FILING DEADLINE IS FAST APPROACHING FOR ENTITIES ESTABLISHED PRIOR TO JANUARY 1, 2024

SYNOPSIS: Beginning on January 1, 2024, most legal entities within the United States were mandated to file beneficial owner information reports (“BOI Reports”) with the U.S. Treasury Department, Financial Crimes Enforcement Network (“FinCEN”) pursuant to the federal Corporate Transparency Act (“CTA”). A beneficial owner is someone who directly or indirectly has substantial control over a legal entity or someone who owns or controls at least 25 percent of a legal entity. A reporting company can have multiple beneficial owners, and every reporting company is expected to identify and report at least one beneficial owner to FinCEN.

ACTIONS REQUIRED: The deadline for legal entities, such as limited liability companies and corporations, to file BOI Reports varies based upon the date of formation of the legal entity. For example, entities formed on or after January 1, 2024, were required to file their initial BOI Reports within ninety (90) days of formation. Therefore, non-exempt entities formed in the first or second quarters of this year that have not filed BOI Reports are noncompliant with the CTA and should immediately address their reporting requirements. However, legal entities formed before January 1, 2024, were given an extended period to file BOI Reports. That deadline - January 1, 2025 - is quickly approaching notwithstanding legal challenges in federal courts as to the constitutionality of the CTA.

BOTTOM LINE: Failure to comply with the CTA filing requirements can result in per diem penalties around $500 per day, and possible civil and criminal penalties for willful failure, making compliance imperative. Legal entities required to comply with the CTA should give prompt attention to meeting BOI Reporting requirements.

If you have questions pertaining to the Corporate Transparency Act or any other business matters, please contact PLDO Partner Benjamin L. Rackliffe at brackliffe@pldolaw.com.

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NEW FEDERAL TRADE COMMISSION “CLICK TO CANCEL” RULE IMPACTS A WIDE RANGE OF AUTO-RENEWAL PRODUCTS AND SERVICES

After receiving thousands of complaints about negative option and recurring subscription practices each year, on October 16, 2024, the Federal Trade Commission (“FTC”) announced its final “Click To Cancel” rule, making it easier for consumers to end recurring subscriptions and memberships.

The final rule is part of the FTC’s ongoing review of its 1973 “Negative Option Rule,” which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs that are prevalent in this digital economy. These major amendments to the existing rules impact a broad range of subscription products and services that include an auto-renewal feature. In addition to standard auto-renewal features, the new rule also cover free or low-cost trials that convert to subscriptions and pre-notification negative option features.

In a recent Client Advisory, William F. Miller outlines the requirements of the new rule and offers businesses practical takeaways. All companies should determine if and how the FTC’s new “Click to Cancel” rule will impact their business. To access the Advisory, click here.

If you have questions or would like more information, please contact your PLDO attorney or Attorney Miller at 508-420-7159 or email wmiller@pldolaw.com.

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Raising capital through equity financing is essential for certain companies, such as startups that do not qualify for traditional bank financing or companies that lack predictable cash flow, stable revenue, or have insufficient collateral. Equity financing requires compliance with either Rule 506(b) or Rule 506(c), two key exemptions under Regulation D of the Securities Act of 1933.

Both Rule 506(b) and (c) have opened the door for companies to attract investors and raise capital without going through a full public offering. However, choosing between these exemptions is an important decision as there are notable differences in terms of solicitation, types of investors allowed, and compliance obligations. PLDO’s Gary R. Pannone and Paige E. Macnie outline the key benefits, distinctions and requirements in their latest Advisory that can be accessed by clicking here.

The choice between Rule 506(b) and Rule 506(c) depends on your fundraising strategy and businesses should weigh the pros and cons to determine the best method to raise capital for their company. If you have questions or need assistance, please contact Attorney Pannone or Attorney Macnie at 401-824-5100; gpannone@pldolaw.com or pmacnie@pldolaw.com.

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