The Mandatory Reporting of Beneficial Ownership Information is on “Hold” Again! The Appellate Court Reinstates the Nationwide Injunction “Pausing” All Reporting Under The Corporate Transparency Act

By Linda R. Brower, Esq., Senior Counsel, Commercial Transactions

What Happened

In the same week, the Fifth Circuit Court of Appeals both lifted, and then reinstated, the temporary injunction halting enforcement of The Corporate Transparency Act (Act) and its reporting requirements.

On December 23, 2024, a three-judge panel (the “motion panel”) of the Fifth Circuit Court of Appeals granted the government’s emergency motion to reverse a lower District Court’s decision to impose a nationwide injunction against enforcement of the Act. The motion panel held that the government had met its burden to demonstrate the likelihood of success on the merits that the Act is constitutional. As a result of this decision, the government immediately extended the reporting deadlines under the Act for a brief period, adjusting most of them to January 13, 2025.

At the same time, the plaintiffs in the underlying case petitioned the same appellate court for an emergency hearing en banc – a hearing by a panel consisting of a greater number of judges (a “merits panel”). Plaintiffs asked the merits panel to reverse the decision lifting the injunction made by the motion panel.

On December 26, 2024, the merits panel did just that. It reversed the decision of the motion panel, the effect of which was to reimpose the nationwide “pause” in enforcing the Act and to suspend the new reporting deadlines for all reporting entities under the Act. The merits panel said it was reimposing the injunction to “preserve the constitutional status quo” so that the Fifth Circuit Court would have sufficient time to consider the parties’ “weighty substantive arguments.” The merits panel decided that forcing plaintiffs to comply with the Act now would unfairly prejudice their claims, even if they were to ultimately lose on the merits of their claims. Thus, for now, the government is enjoined from enforcing the Act and there are no reporting deadlines in place. Voluntary reporting under the Act continues to be permitted and has never been halted at any time during consideration of the issues by the prior courts in the case.

The Fifth Circuit has set an expedited briefing and hearing schedule in the case for early in 2025. Oral argument is now scheduled for March 25, 2025, after which the Fifth Circuit appellate court will issue its final decision on the constitutionality of the Act.

What’s Next

Currently, there is no obligation for reporting companies to report under the Act. This applies to all reporting under the Act, not just the filing of initial reports. Therefore, regardless of when a reporting company was formed, no initial, updated or corrected reports have to be filed now.

Reporting companies should continue to monitor the News section of the BMK website for information and updates about the status of the underlying case in the Fifth Circuit Court of Appeals as well as for updates about the Act and its reporting requirements. We will continue to monitor developments under the Act and report on them as they occur.

This communication is not a full analysis of the matters presented and should not be relied upon as legal advice and could be considered attorney advertising.