Substantial Control
The CTA mandates that reporting companies must submit identification details of the beneficial owners connected to them. According to the CTA, a beneficial owner refers to an individual who either (i) holds “significant influence” over a reporting company, directly or indirectly, or (ii) possesses or governs at least a 25 percent stake in the ownership interests of a reporting company. An individual is deemed to have “significant influence” if any of the following conditions are met:
- they hold a high-ranking position within the company
- they possess authority over the majority of the board or senior officers of a company
- they play a pivotal role in the company’s crucial decisions, or
- they exhibit any other form of significant influence over the company.
Even though the criteria for designation as a beneficial owner might seem to pertain to individuals with direct ties to the company, those indirectly associated with the company will also be acknowledged as beneficial owners if they meet any substantial control conditions. Specifically, individuals can indirectly wield significant influence over a reporting company by managing one or more intermediary entities, which subsequently exert significant influence over the reporting entity.
