Virtual Board and Member Meetings

By Jillian Wright, Esq.

Good news for directors and managers who hold virtual meetings but hate the hassles that come with hybrid meetings: you can legally hold solely virtual meetings! Read on for details.

Associations have been using virtual video communications platforms like Zoom, GoTo Meetings, and Microsoft Teams for the last few years to hold board and member meetings. This was borne out of necessity as a result of the stay away orders of the COVID-19 pandemic. Boards continued to hold virtual meetings after the pandemic finding them convenient and efficient; more people – members, board directors, management, and vendors – are able to attend board meetings and at a lesser cost to the associations.

However, until recently, unless there was a local, state, or federal state of emergency, Civil Code required that an association still provide a physical location for the board meeting to allow members or board directors to physically attend the meeting if they desired to do so (Civil Code section 4090(b)). This led to hybrid meetings where boards held meetings both virtually and at a physical location. While convenient for some, it complicated matters for others as it required enhanced audio visual equipment to allow those attending virtually to hear the members attending in person and increased costs for management’s presence in person or venue rentals.

Now, as of January 1, 2024, Civil Code section 4926 allows boards to hold board meetings (and members to hold member meetings) solely by “teleconference”, without a physical location, provided a few conditions are met. Namely, associations planning to hold solely virtual meetings must give specific notifications to members; ensure director votes are cast clearly by roll call vote; allow members to attend by telephone; and protect members’ and directors’ statutory rights to participate.

Notification Requirements

Associations holding solely virtual meetings must provide notices of the meeting (given in accordance with Civil Code section 4920) which include:

    1. Clear technical instructions on how to participate by teleconference;
    2. The telephone number and e-mail address of a person who can provide technical assistance with the teleconference process, both before and during the meeting; and
    3. A reminder that a member may request individual delivery of meeting notices, with instructions how to do so.

Board Roll Call Vote

To ensure the record is clear, Civil Code section 4926 requires that any vote of directors be conducted by roll call vote (Civ. Code section 4926(a)(3)). This means each director’s name should be stated either by the directors themselves or by the president or manager before they vote for, against, or abstain on a motion. Since the directors are required to vote using a roll call, each director’s vote should be noted in the minutes rather than just stating that a motion passed or failed.

Member Participation

Directors and members need to be given the chance to participate as they would at any meeting held in person (Civ. Code section 4926(a)(2)). This means that members need to be given the chance and capability to speak during the open homeowner forum. All present at the meeting – directors and members alike – need to be able to hear and be heard. However, we note that the board may opt to mute members during those portions of the meeting where the board is conducting board business and members are not permitted to interject.

Attendance by Telephone

Associations need to give members and directors the option to attend a board meeting by telephone (Civ. Code section 4926(a)(4)). This is usually already offered through the more common virtual meeting platforms. Associations should consider including instructions for muting and unmuting oneself while on telephone in the notice of the meeting. Managers may also want to make an announcement at the beginning of the meeting as to when it is appropriate to unmute oneself and how to do so to avoid those less technologically savvy members from complaining that they are not able to address the board during open homeowner forum.

Exception

Civil Code section 4926(b) clarifies that while some member meetings may be held solely virtually, those meetings at which ballots are counted and tabulated pursuant to Section 5120 may not be held exclusively by teleconference.

Conclusion

Holding meetings virtually has its advantages, but associations need to make sure they are conducting such meetings in accordance with the law to avoid members’ challenging the validity of actions taken at such meetings. If you have any questions about the requirements discussed in this article or in the Open Meetings Act generally, we recommend you consult with your legal counsel directly.

 

[Podcast] HOA’s Responsibility to Support CLAC with Kieran J. Purcell, CCAL

Don’t miss Epsten, APC attorney and Managing Shareholder Kieran J. Purcell, CCAL’s recent participation on the “HOA – It’s a True Story” podcast hosted b @thegbgroupinc. In this episode, Kieran explains the importance of HOA participation in following HOA legislation. Listen now: https://lnkd.in/ghABQfzP

Epsten, APC Relocates its Coachella Valley Office

 

Epsten, APC, a leading law firm specializing in providing legal solutions to community associations, is pleased to announce the relocation of its Coachella Valley office from Indian Wells to Palm Desert. The new office is located in One Paseo Plaza, 74-199 El Paseo Drive, West Building, Suite 201A, Palm Desert, CA 92260. The firm’s phone numbers and email addresses will remain the same. For more information, email us at [email protected].

What’s on your Agenda?

By Jon H. Epsten, Esq., CCAL

Over the last several months, several questions concerning agendas have resurfaced. For ease of reading, I have listed some of these questions below with a shortened version of my responses.

Please be on the lookout for practice tips on preparing agendas in future publications.


Question:

Why do we need an agenda?

If the Board intends to discuss a matter at a board meeting, the topic must be on the agenda. No worries. A procedure exists for adding certain items to the agenda (discussed below).


Question:

How much topic detail is necessary on the Open Meeting agenda?

The purpose of the agenda is to place attendees on notice as to what is going to be discussed during the meeting. It is beneficial to have a well-thought-out agenda. Boilerplate agendas are discouraged. Look at your agenda objectively from an uninformed owner’s perspective. If you read your agenda, you would know what the Board discussed at the meeting. Think of the agenda as a legal document that can be used as a tool to defend the Association. An agenda is also a tool to reference historical matters, such as when the Board approved or considered an item.


Question:

Should the Executive Session Agenda have the exact details as the Open Meeting Agenda?

The Board needs to have a clear understanding of what can be discussed in Executive Session (ref. Civil Code section 4935). The Executive Session agenda should tie into what is allowed to be addressed in the Executive Session (e.g., legal matters, personnel matters, member discipline, assessment payment plans, etc.) The Executive Session agenda will have less detail than other meeting agendas, as the items to be discussed may be deemed privileged. For example, if the Executive Session discussion covers collection matters, the owner’s name should be omitted. Similarly, discussions of ongoing or anticipated litigation should be noted in the agenda in general terms. It is a good practice to briefly consult with legal counsel if you have any questions on the description of items to be placed on the Executive Session agenda.


Question:

Who should prepare the agenda?

Oddly enough, the law contains little guidance in this matter. While “the board” is ultimately responsible for deciding what goes on the agenda, the law does not state that any particular director or officer may determine what goes on the agenda. Unless there are rational and substantive reasons for rejecting a request from a director to add an item to the agenda, a requested agenda item should be included. Note that the Board determines what to include on the agenda, and there is no procedure for owners to dictate to the Board the agenda for board meetings. In smaller communities, the agenda is typically prepared by the association manager. In larger communities, the agenda is generally prepared by the General Manager in conjunction with a designated board member. In either event, we suggest that a board member (typically the Board Secretary) be appointed to work with the association manager on agenda topics.


Question:

What do we do if an owner raises a topic outside the agenda at an Open Board Meeting?

The law allows the Board, among other things, to briefly respond to statements or questions posed by a person speaking at a meeting, ask a question for clarification, make brief announcements, and make a brief report on the Board’s activities. However, unless the item falls into one of the categories listed below, it cannot be added to the agenda for that board meeting.


Question:

Can we add items to the agenda after it has been published to the Owners?

Yes, under certain circumstances (Civil Code section 4930(d)(1)(2)(3)] such as an emergency, where immediate action is needed or where the item appeared on the agenda 30 calendar days before the action is taken and at a prior meeting the item was continued. A board motion and vote must be taken to add the item under the conditions mentioned above to the agenda, and we recommend the minutes of that meeting reflect the motion to add the item and the particular statutory provision that would allow the addition of the item.

 

If you have any questions, please contact a member of our Community Associations legal team.

Susan M. Hawks McClintic New President-Elect of CAI – San Diego

Epsten, APC’s Shareholder and Board Member, Susan M. Hawks McClintic, is the new President-Elect for the Community Association Institute – San Diego Chapter (CAI-SD) 2024 Board of Directors. CAI-SD provides homeowner association professionals and leaders with the information, education, and support they need to ensure their communities can thrive. Sue follows the footsteps of other Epsten attorneys who led the CAI – San Diego Chapter in the past.

Sue has been an active Board Member for CAI-SD for the past 30 years, serving as Treasurer and member of the Education Committee. She has also served CAI National on the Board of Directors for the CAI Foundation for Community Association Research, is a member of the CAI Diversity, Equity & Inclusion Committee, including working on a committee to develop an M400 course, and is a past member of the CAI Case Law Review Committee.

Sue has over three decades of experience in community association law, developing a unique expertise in document interpretation, amendments, and restatements. She speaks regularly throughout the Community Association industry and is a fellow of the College of Community Association Lawyers (CCAL).

Court Rules Email Exchanges Without Board Action Are Not Board Meetings – Updated 2/12/24

*Updated 2/12/24

LNSU #1, LLC v. Alta Del Mar Coastal Collection Community Association, 2023 Cal. App. LEXIS 646.

 

Previously, we shared the ruling of the Court of Appeals for the Fourth Appellate District in LNSU#1 v. Alta Del Mar Coastal Collection Community Association (2023) 94 Cal. App. 5th 1050.  In that case, the court held that an email discussion among board members regarding items of association business did not violate the Open Meeting Act, because such email exchanges are not considered “board meetings” as that term is defined in Civil Code section 4090(a).

As a reminder, the case involved two homeowners who sued their homeowners association arguing, among other things, that the board violated the Open Meeting Act by conducting board meetings through a series of emails. The trial court found in favor of Alta Del Mar. The homeowners appealed and the Court of Appeals upheld the trial court’s decision.

It’s important to keep in mind that this ruling is limited to email discussions among board members.  It probably would not extend to a discussion among a quorum of the board physically present at the same time and place, because that likely would constitute a “board meeting” under Civil Code section 4090(a), even if the board took no action at that meeting.

It’s also important to remember that the purpose of the Open Meeting Act is to foster transparency.  Although email discussions might not violate the Open Meeting Act, those email exchanges could be discoverable in future litigation.  Certainly, discussions of agendas, date, time and place of meetings, and dissemination of necessary new information would appear to be (both before and after the Alta Del Mar decision) appropriate. However, wisdom dictates that the less a director uses email to discuss board business, homeowner personalities and conflicts, vendor qualifications and the like, the better.

 

ORIGINAL ARTICLE AS PUBLISHED ON 8/31/23

The Court of Appeals for the Fourth Appellate District just held that an email discussion among board members regarding items of association business did not violate the Open Meeting Act, because such email exchanges are not considered “board meetings” as that term is defined in Civil Code section 4090(a).

Two homeowners sued their homeowners association Alta Del Mar Coastal Collection Community Association arguing, among other things, that the board violated the Open Meeting Act by conducting board meetings through a series of emails. The trial court found in favor of Alta Del Mar. The homeowners appealed and the Court of Appeals upheld the trial court’s decision.

The Court of Appeals explained that the definition of “board meeting” in Civil Code section 4090(a) refers to “a gathering of a quorum of the directors … at the same time and in the same physical location….” Consequently, the appellate court reasoned that emails sent by board members at different times from different physical locations did not constitute a “board meeting” within the meaning of Section 4090(a).

The Court of Appeals went on to explain that “[b]y discussing items of Association business in e-mails …, the directors did nothing contrary to the purpose of the [Open Meeting Act], because they took no action on those items in the e-mails. Although the [Open Meeting Act] prohibits the board from acting on items of Association business outside a board meeting…, it does not prohibit the board from discussing the items outside a meeting.” (Emphasis in original.)

Therefore, the appellate court concluded that the phrase, “board meeting,” as defined by Civil Code section 4090(a), refers to “an in-person gathering of a quorum of the directors of a homeowners association at the same time and in the same physical location for the purpose of talking about and taking action on items of association business. E-mail exchanges among directors on those items that occur before a board meeting and in which no action is taken on the items…do not constitute board meetings within the meaning of that provision.”

As momentous as this case is, caution must be exercised for the moment because it is possible that this decision may yet be altered, withdrawn from publication, or further appealed. Once the time to take any of these actions has expired, we will immediately issue an update. Please consult with your own legal counsel, if you have questions concerning the interpretation of this case.

The Maintenance Matrix: An Incredibly Helpful Tool

By Lindsay J. Anderson, Esq.

One of the perks of living in a common interest development is that maintenance, repair, and replacement responsibilities for various components are divided between the association and the owners.  This means that the expense of maintaining, repairing, and replacing some components are shared across the entire community (or a portion of the community, depending on what your governing documents provide) while the expense of maintaining, repairing, and replacing other components are borne by the individual owners.  These responsibilities can also be split up so that specific maintenance and repair items are the responsibility of the owners while replacement of the item is the responsibility of the association.  Sharing the cost burden of common components can help to ensure that the community is maintained at more uniform level.  However, maintenance, repair, and replacement responsibilities are not one size fits all and vary widely from community to community.

So, how can the board and management know who is responsible for what?

The particulars are found in the community’s governing documents which include condominium plans, tract maps, CC&Rs, articles of incorporation, bylaws, and operating rules, regulations, policies, and resolutions.  There are also statutory defaults found in the law for maintenance, repair, and replacement responsibilities which can be found in Civil Code section 4775, but it is important to note that these statutory defaults do not apply if the CC&Rs provide for a different breakdown of responsibility.

The board and management can review each situation on a case-by-case basis when a determination needs to be made on responsibility.  This will involve reviewing the governing documents for each component as issues arise and may require consultation with the association’s counsel if the documents are ambiguous.  There are two main problems with this approach.  First, these questions often pop up during emergencies and answers need to be ascertained quickly which can lead to unnecessary stress for the board and management.  Second, this can mean that the owners do not understand what their responsibilities are.

Alternatively, if an association has planned ahead, the association’s board and management can turn to their handy dandy maintenance matrix!  A maintenance matrix is a compilation of the maintenance, repair, and replacement responsibilities in a clear and concise chart which depicts the specific assignments for each component.  A maintenance matrix is prepared by reviewing all of the governing documents and the statutory defaults in advance so that it can be referred to when questions arise about responsibilities.

Adopting a maintenance matrix is one of the most effective ways of ensuring that owners, the board, and management understand who is responsible for each component.  Consultation with legal counsel during the process of preparing a maintenance matrix is crucial to help avoid any potential errors in the matrix which can lead to liability.  Carefully examining inconsistencies and discrepancies up front can save the association time and money down the road.

Maintenance matrices may be adopted as an operating rule in accordance with Civil Code section 4360 or can be adopted as part of the CC&Rs through an amendment or restatement.  The benefit of adopting a maintenance matrix as a rule is that the maintenance matrix can be adopted by the board at an open meeting after considering any comments made by the membership during the membership’s twenty-eight (28) day comment period.  There is no need for a membership vote if the matrix is adopted as an operating rule.

However, the board may not use a maintenance matrix that it has adopted as an operating rule to make any changes to the maintenance allocation that conflicts with the CC&Rs.  You cannot use it as a wish list.  Civil Code section 4205 establishes the statutory hierarchy of governing documents of common interest developments – law, condominium plans/tract maps, CC&Rs, articles of incorporation, bylaws, and operating rules, regulations, policies, and resolutions.  If there is a conflict between the CC&Rs and one of the sources below the CC&Rs in the hierarchy, the CC&Rs will prevail.  If the maintenance matrix is adopted as an operating rule, it cannot be used to override the CC&Rs given this statutory hierarchy.

Adopting a maintenance matrix as an amendment to the CC&Rs or as part of a restatement of the CC&Rs will allow the association to make changes to the maintenance, repair, and replacement responsibilities.  Amendments to the CC&Rs and restatements of the CC&Rs require membership approval – often the approval of a supermajority – which sometimes can be difficult to achieve given membership apathy.  However, adopting a maintenance matrix through an amendment to the CC&Rs or restatement of the CC&Rs is the best method.

Once a maintenance matrix is adopted or approved by the Board (or the membership, depending on whether a membership vote is required), it can be used by owners, the board, and management to determine maintenance, repair, and replacement responsibilities and can essentially serve as the association’s cheat sheet.

If your association is considering creating a maintenance matrix, your board should contact your association’s legal counsel for assistance in preparing or reviewing the matrix prior to implementation.

Mum’s the Word When Disclosure Leads to Breach of Fiduciary Duty

By Karyn A. Larko, Esq.

It is common knowledge that a director has a fiduciary duty to his or her association and its members.  To be a fiduciary means that the director has accepted the highest duty imposed by law.  This duty obligates the director to act:

    1. In good faith;
    2. In a manner such director believes to be in the best interests of the Association; and
    3. With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

This duty also obligates the director to place the interests of the association and its members as a whole over the director’s personal interests in the event these interests conflict.  This duty is referred to as the duty of loyalty or duty of undivided loyalty.

What may be less known is that one of the most common breaches of fiduciary duty is the disclosure by a director of information that should be kept confidential.

The disclosure of information that should be kept confidential can give rise to both a breach of a director’s duty of care and duty of loyalty.  In accordance with Civil Code section 4935, certain matters are discussed out of earshot of the members in executive session board meetings (i.e., discussions pertaining to personnel issues, the formation of contracts with third parties, litigation and potential litigation, disciplinary actions against members and member assessment issues).  Each of these issues requires the discussion of matters that if made public (i.e., disclosed to any persons other than current board members and management, including other owners) could needlessly and unnecessarily embarrass an owner or employee, compromise the association’s legal position in a dispute, result in the waste of association funds, lead to a claim that an owner’s privacy rights have been breached, or otherwise result in an unfavorable position for the association.  All of these results could lead to litigation and ultimately, to liability for the association.

Another act that is contrary to the interests of an association and damaging is the disclosure of association attorney-client privileged communications (i.e., legal advice) to third parties.  Communications between an association’s legal counsel and the board or management staff are subject to the attorney-client privilege.  This means these communications are protected communications that can be kept confidential from any disclosure, including disclosure during litigation.  In the litigation context, this protection is extremely important as it allows frank and open communication between the board and/or management staff and the association’s legal counsel as to what occurred and the strengths and weaknesses of the association’s position with regard to the claim or claims being made.  This protection also enables the association’s legal counsel and board to properly evaluate what course of action the association should take.

When communications between an association’s legal counsel and board or management  are revealed to others, including owners who are not on the board and family members, this disclosure can result in a waiver of the association’s attorney-client privilege.  This means that the association may be required to disclose all of the communications between the association’s legal counsel and the board or management, including without limitation, communications regarding the strengths and weaknesses of the association’s position and its legal strategy.  The disclosure of this information would, inevitably, be extremely prejudicial to the association’s interests.

A final act that is contrary to the interests of an association is the disclosure to persons other than board members of other sensitive information or documents that could expose the association to potential liability.  Examples of such information and documentation include the release of social security numbers, owner bank account numbers or other financial information, owner or resident health records, owner disciplinary records, plans and specifications for owner alterations (including security systems), vendor bids and proposals and confidential settlement agreements.  It should be noted that this list is by no means all encompassing.

The Significance of Disclosing Information that Should be kept Confidential

As stated above, the disclosure of information that should be kept confidential can lead to liability for the association.  It can also lead, in some cases, to personal liability for the director who discloses the information.  We say this because while California law generally protects volunteer directors from liability for their acts when those acts fall within the scope of their duties as a director, subject to certain requirements being met, this protection does not extend to instances where directors have breached their fiduciary duty to the association and its members.  Likewise, while the governing documents for many associations contain clauses protecting directors from liability, California law (i.e., Corporations Code section 204(a)(10)) expressly invalidates these clauses to the extent they attempt to protect directors from personal liability for breaching their fiduciary duty.

Finally, it is important to know that most directors and officers policies contain an exclusion whereby there is no coverage for a director who has breached his or her fiduciary duty.  Further, some carriers will issue a reservation of rights letter when asked to defend a breach of fiduciary duty claim.  This means that if the director is ultimately found by a judge or jury to have breached his or her fiduciary duty, the carrier is entitled to recover its defense costs from the applicable director.

 

PRACTICE TIPS:

  • When in doubt, do not share information with persons outside of the board and management without first checking with your association’s legal counsel on the advisability of doing so.
  • If participating in a telephonic or video executive session board meeting, do so in private. Do not allow family members or other persons to listen in on executive session meeting discussions.
  • Do not use phrases like “according to our attorney” or “on the recommendation of our attorney” when communicating with persons outside of the board and management as the use of such phrases could be deemed a waiver of the association’s attorney-client privilege.

 

The Corporate Transparency Act (Updated 2/1/2024)

*This article was updated on February 1, 2024.

By Kieran J. Purcell, Esq.

In an effort to enhance corporate transparency and combat money laundering, tax fraud, and other illicit activity, Congress passed The Corporate Transparency Act (CTA) in 2021.  The CTA will be enforced by the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury. FinCEN published the Small Entity Compliance Guide (Guide)[1] to help small entities comply with the requirements of the Beneficial Ownership Information Reporting Rule (Reporting Rule) issued on September 30, 2022.[2]  Although the CTA applies to many types of small business entities, this article addresses some of the most frequently asked questions about how the CTA may apply to common interest developments (CIDs) after it goes into effect on January 1, 2024.

Who must file a Beneficial Ownership Information (BOI) Report?

The CTA requires certain entities to file beneficial ownership information (BOI) reports to FinCEN. These reports contain information about the entity itself and two categories of individuals: (1) beneficial owners and for domestic reporting companies created or registered after January 1, 2024,  (2) company applicants.  Generally, a beneficial owner is an individual who owns or controls at least 25 percent of a company or has substantial control over the company. A company applicant is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company.

When will initial BOI Reports be required?

BOI Reports can be filed electronically through FinCEN’s secure filing system beginning January 1, 2024. Reporting companies created or registered to do business before January 1, 2024, have until January 1, 2025, to file their initial BOI reports. Reporting companies created or registered after January 1, 2024, but before January 1, 2025, will have 90 calendar days from their creation/registration to file their initial reports. Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports. Additional information about the Reporting Rule and guidance materials are available at www.fincen.gov/boi.

Is my CID a Reporting Company?

“A reporting company is any entity that meets the ‘reporting company’ definition and does not qualify for an exemption. There are two categories of reporting companies: a ‘domestic reporting company’ and a ‘foreign reporting company.’”[3] This article only addresses domestic reporting companies. If your CID is a corporation created under United States laws, including laws of the individual states or Indian tribes, it is a domestic reporting company unless it meets one of twenty-three (23) exemptions.  For many CIDs, the most likely possible exemption is the large company exemption.

Is my CID eligible for a Large Company Exemption?

A CID qualifies for this exemption if it meets all of the following criteria.[4] It has more than twenty (20) full-time employees employed in the United States, the CID regularly conducts its business at a physical location in the United States, the CID filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales.

My non-exempt CID is a Reporting Company; What do I do next?

If your CID is a reporting company, your next step is to identify its beneficial owners. “A  beneficial owner is any individual who, directly or indirectly: (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company.”[5] FinCEN expects that every reporting company will be able to identify and report one or more beneficial owner to FinCEN. If an individual qualifies as a beneficial owner, information about that individual must be reported to FinCEN in a reporting company’s BOI report.

“A reporting company can have multiple beneficial owners. For example, a reporting company could have several beneficial owners who exercise substantial control over the reporting company and may have no beneficial owners who own or control at least 25 percent of the ownership interests of the reporting company. There is no maximum number of beneficial owners who must be reported.”[6]

Which individuals exercise substantial control over the CID?

“Reporting companies are required to identify all individuals who exercise substantial control over the company. There is no limit to the number of individuals who can be reported for exercising substantial control. “[7]

While the Reporting Rules lists four (4) Substantial Control Indicators (SCIs) for determining the individual(s) who exercise(s) substantial control over a reporting company[8], we will focus on the two (2) SCI categories which may most commonly apply to CIDs, Senior Officers, and Important Decision Makers.

Senior Officers are defined as an individual holding the position of President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, or General Counsel who perform similar functions as these corporate officers.  Senior Officers are considered Beneficial Owners.

Important Decision Makers are any individuals who direct, determine, or have substantial influence over important decisions made by the reporting company, such as business or financial decisions. Please note managing agents and employees may be exempt from being beneficial owners. Managing agents, such as community association managers, may qualify for an agency exemption to the definition of beneficial owner if they perform ordinary advisory or contractual services. Employees of the reporting company who are not senior officers and whose substantial control is derived solely from their employment status may qualify for an employee exemption.[9]

What specific information does my CID need to report about each beneficial owner?

  • Full Legal Business name and any trade name or doing business as (DBA) name of the reporting company.
  • Complete current United States address of the reporting company.
  • Each Beneficial Owners must provide:
    • Full legal names
    • Date of birth
    • Complete current addresses
    • Unique identifying number/issuing jurisdiction/image (government issued photo identification, such as a driver’s license or passport)

When must reporting company provide updates or corrected BOI Reports?

An updated BOI Report containing updates, corrections, and additions are to be made within 30 days of the reporting company becoming aware of the change.  CIDs should calendar this date when planning election timelines to make sure updates are reported in a timely manner.  However, as the makeup of the CID Board of Directors may shift throughout the year as seats are vacated and filled through appointment, CIDs should keep the 30-day requirement in mind even outside of normal election cycles.

Consequences of failing to provide timely or accurate BOI Reports

The willful failure to provide timely, complete or updated BOI Reports to FinCEN, or the willful submission or attempt to submit a false or fraudulent BOI report may also result in a civil or criminal penalty, including civil penalties of up to $500 for each day the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may also be held accountable for that failure.

Is my reporting company required to report its company applicants?

A domestic reporting company is required to report its company applicants if it is created on or after January 1, 2024.

A domestic reporting company is not required to report its company applicants if it was created before January 1, 2024.

Efforts are being made to exempt CIDs and/or extend the reporting deadline

In late 2023, the U.S. House of Representatives passed the Protect Small Business and Prevent Illicit Financial Activity Act (H.R. 5119) by a vote of 400-1. This bill would delay the Corporate Transparency Act reporting requirements for one year. Currently, a companion bill is before the Senate.  How the Senate will vote on this issue is unclear at the time this article is being written. However, some industry commentators have stated they believe the Senate will approve a 1-year hold on all Corporate Transparency Acts reporting requirements.  In addition, they have stated it is less likely a CID exemption will be approved.


[1] FinCEN’s Small Entity Compliance Guide, December 2023, Version 1.1 can be found at: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

[2] Beneficial Ownership Information Reporting Rule, Title 31, Section 1010.380 of the Code of Federal Regulations.

[3] FinCEN’s Small Entity Compliance Guide, December 2023, Version 1.1, at 2.

[4] Id. at 12.

[5] Id. at 16.

[6] Id.

[7] Id. at 17.

[8] Id. at 17.

[9] Id. at 30.

 

Joseph A. Sammartino Appointed Co-Chair of the Litigation Department

Epsten, APC’s Board of Directors, is pleased to announce that Joseph A. Sammartino has been appointed Co-Chair of the Litigation Department. Joe has litigated civil cases on behalf of and against major international companies and has defended clients in state and federal courts throughout California and the United States.

Joe has significant experience in litigation involving real estate disputes, contract disputes, business disputes, partnership disputes, trade secret disputes, real estate matters, construction, construction defect, product liability, professional liability, insurance bad faith, and employment matters. Joe has handled all aspects of litigation from pre-litigation demands, negotiations, and settlements through the filing of complaints, discovery, comprehensive motion practice, depositions – having served as lead counsel in over 350 depositions – mediation and settlement, arbitration, or trial and verdict in state and federal courts, including appeals.

Joe has served as outside general counsel for clients, providing services including: corporate structures, dispute avoidance and resolution, drafting and reviewing contracts, agreements and leases, nondisclosure agreements, partnership agreements, reseller and distributor agreements, professional services agreements, financing structures and deals, real estate leases and sales, easements, equipment sales and leases, severance agreements, employee handbooks, risk management policies and procedures, due diligence, and letters of intent for mergers and acquisitions.