Amd 102, 203, 211, 802 & 804, add 215 & 810, Lim Lil L; add 100-b, Exec L
Relates to the disclosure of beneficial owners of limited liability companies and foreign limited liability companies and certain information about such beneficial owners; requires the secretary of state to maintain a public database of all business entities organized in the state and all foreign business entities with authority to do business in the state.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3484A
SPONSOR: Gallagher TITLE OF BILL:
An act to amend the limited liability company law and the executive law,
in relation to the disclosure of beneficial owners of limited liability
companies
PURPOSE OR GENERAL IDEA OF BILL:
This bill aims to end the practice of anonymous ownership of limited
liability companies in New York by defining beneficial ownership,
requiring the disclosure of the identities of beneficial owners upon
company formation or registration, and publishing beneficial owners of
limited liability companies in New York's publicly searchable business
entity database.
SUMMARY OF SPECIFIC PROVISIONS:
Section one is the short title.
Section two amends section 102 of the limited liability company (LLC)
law to define beneficial owner, initial report, reporting company and
exempt. company.
Section three amends section 203 of the LLC law to require that LLCs
include an initial report, including a list of beneficial owners, with
the documents submitted to the Department of State when organizing an
LLC in New York State. Exempt companies must indicate which exemption(s)
they are claiming against their obligation to file such initial report.
The exemptions that may be claimed are identical to those promulgated by
the federal Treasury Department through regulation.
Section four amends section 211 of the LLC law to require that updates
and corrections to information required in an initial report are filed
with the Department of State.
Section five amends the LLC law to create a new section, 215, that
enumerates the information that must be disclosed by an LLC when identi-
fying one of its beneficial owners. The list of items is identical to
the information that must be disclosed to the Treasury Department pursu-
ant to federal law. Section 215 also permits an LLC to file an identical
copy of the report it filed with the Treasury Department with the New
York Department of State in order to satisfy state reporting require-
ments.
Sections six, seven, and eight make the same changes as sections three,
four, and five above, but as applied to foreign limited liability compa-
nies, by amending sections 802 and 804 of the LLC law and adding a new
section, 810.
Section nine requires that the secretary of state maintain a publicly
available database on its website for each business entity organized in
New York. The data base must include, among other things, the name of
the business entity, the current business street address and county
associated with each business street addreSs, and the full name(s) of
each beneficial owner. The Secretary of 'State is required to establish
rules and regulations to allow beneficial owners to apply for confiden-
tiality waivers.
Section ten is the effective date.
JUSTIFICATION:
Limited liability is a legal privilege conferred upon an individual by
the state, and the receipt of such privilege should be conditioned on
the identification of the individual benefiting from it. Permitting
anonymous limited liability companies to do business in New York was a
public policy mistake that deserves correction. Anonymous corporate
ownership has proliferated since the 1990s and has contributed to numer-
ous problems. Anonymous shell companies are used to bypass sanctions,
avoid taxes, fund terrorist organizations and organized crime, and laun-
der money. Anonymous LLCs leasing real property are correlated with more
numerous code violations, higher rents, and more evictions compared to
non-corporate owners. Drug and human traffickers use anonymous shell
companies like LLCs to launder the proceeds of their criminal activities
and evade detection. Deed theft, campaign finance violations, and bid
rigging can be facilitated by anonymous LLCs. Anonymous LLCs hamper
routine code enforcement, burdening local governments. Meanwhile, the
anonymous ownership of a significant portion of real estate in New York
hampers policy-making and upends centuries of precedent by obscuring the
answer to the question: who owns what?
In response to exposes such as the Panama Papers and the Pandora Papers,
which highlighted the massive, global nature of illicit activity
fostered by anonymous shell companies like LLCs, the UK, European Union,
Australia, New Zealand, Canada, and over 100 countries worldwide are
creating registries of the beneficial owners of corporate and legal
entities, many of them public. In 2021, the federal government passed
the Corporate Transparency Act, which requires the Treasury Department
to collect beneficial ownership information from corporations in a
private, government database. Unfortunately, the inaccessible nature of
the new federal database means that this information will serve no use
for civil society or local government in New York, denying New Yorkers
the many benefits that beneficial ownership transparency offers.
This bill builds on previous efforts to require the disclosure of LLC
members and managers involved in real estate transactions in New York.
The bill adopts the same standards promulgated by the Treasury Depart-
ment pursuant to the Corporate Transparency Act and requires that the
same information also be filed with New York's Department of State.
Companies subject to the federal government's reporting requirements may
submit a copy of their federal registration to New York's Department of
State in order to minimize the burden of such reporting. To protect
genuine privacy interests that some individuals may have, a waiver proc-
ess is created, with specific protections for whistleblowers using LLCs
to file false claims act lawsuits and individuals participating in an
address confidentiality program.
PRIOR LEGISLATIVE HISTORY:
A9415 / S8439 (2022) - died on third reading.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be determined.
EFFECTIVE DATE:
This bill is effective 365 days after becoming law, provided however
that the repeal, amendment, or enactment of any rule or regulation
necessary to effectuate the meaning or purpose of this law on its effec-
tive date is authorized to be made or completed before its effective
date.
STATE OF NEW YORK
________________________________________________________________________
3484--A
2023-2024 Regular Sessions
IN ASSEMBLY
February 3, 2023
___________
Introduced by M. of A. GALLAGHER, MITAYNES, GONZALEZ-ROJAS, L. ROSEN-
THAL, EPSTEIN, KIM, THIELE, MAMDANI, SIMON, DAVILA, FORREST, CARROLL,
KELLES, SHRESTHA, GLICK, MAGNARELLI, ROZIC, JACOBSON, SHIMSKY, SILLIT-
TI -- read once and referred to the Committee on Corporations, Author-
ities and Commissions -- committee discharged, bill amended, ordered
reprinted as amended and recommitted to said committee
AN ACT to amend the limited liability company law and the executive law,
in relation to the disclosure of beneficial owners of limited liabil-
ity companies
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Short title. This act shall be known and may be cited as
2 the "LLC transparency act".
3 § 2. Section 102 of the limited liability company law is amended by
4 adding four new subdivisions (ii), (jj), (kk) and (ll) to read as
5 follows:
6 (ii) "Beneficial owner" shall have the same meaning as defined in 31
7 U.S.C. § 5336(a)(3), as amended, and any regulations promulgated there-
8 under.
9 (jj) "Initial report" shall mean the report required to be filed
10 pursuant to 31 C.F.R. § 1010.380, as amended.
11 (kk) "Reporting company" shall have the same meaning as defined in 31
12 U.S.C. § 5336(a)(11)(A), as amended, and any regulations promulgated
13 thereunder, but shall only include limited liability companies and
14 foreign limited liability companies.
15 (ll) "Exempt company" shall mean a limited liability company or
16 foreign limited liability company not otherwise defined as a reporting
17 company that meets a condition for exemption enumerated in 31 U.S.C. §
18 5336(a)(11)(B).
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00252-08-3
A. 3484--A 2
1 § 3. Paragraphs 6 and 7 of subdivision (e) of section 203 of the
2 limited liability company law, as added by chapter 470 of the laws of
3 1997, are amended to read as follows:
4 (6) if all or specified members are to be liable in their capacity as
5 members for all or specified debts, obligations or liabilities of the
6 limited liability company as authorized pursuant to section six hundred
7 nine of this chapter, a statement that all or specified members are so
8 liable for such debts, obligations or liabilities in their capacity as
9 members of the limited liability company as authorized pursuant to
10 section six hundred nine of this chapter; [and]
11 (7) in the case of an exempt company, a statement signed by a member
12 or manager indicating the provision or provisions of 31 U.S.C. §
13 5336(a)(11)(B), excluding such company from the definition of a report-
14 ing company to file an initial report, or in the case of a reporting
15 company, the beneficial ownership disclosure information as required
16 pursuant to section two hundred fifteen of this article; and
17 (8) any other provisions, not inconsistent with law, that the members
18 elect to include in the articles [or] of organization for the regulation
19 of the internal affairs of the limited liability company, including, but
20 not limited to, (A) the business purpose for which the limited liability
21 company is formed, (B) a statement of whether there are limitations on
22 the authority of members or managers or a class or classes thereof to
23 bind the limited liability company and (C) any provisions that are
24 required or permitted to be included in the operating agreement of the
25 limited liability company pursuant to section four hundred seventeen of
26 this chapter.
27 § 4. Paragraphs 8, 9 and 10 of subdivision (d) of section 211 of the
28 limited liability company law, paragraph 10 as added by section 18 of
29 part KK of chapter 56 of the laws of 2021, are amended and a new para-
30 graph 11 is added to read as follows:
31 (8) the discovery of a materially false or inaccurate statement in the
32 articles of organization; [and]
33 (9) the decision to change any other statement in the articles of
34 organization[.];
35 (10) to specify, change or delete the email address to which the
36 [secretary] department of state shall email a notice of the fact that
37 process against the limited liability company has been electronically
38 served upon him or her[.]; and
39 (11) in the case of a reporting company, any change in the information
40 required to be disclosed pursuant to section two hundred fifteen of this
41 article, or where a reporting company has not filed the disclosure
42 required by such section, such company shall file such disclosure at the
43 time of filing such certificate of amendment.
44 § 5. The limited liability company law is amended by adding a new
45 section 215 to read as follows:
46 § 215. Beneficial ownership disclosure. (a) When filing the articles
47 of organization pursuant to section two hundred three of this article or
48 filing an amendment of the articles of organization pursuant to section
49 two hundred eleven of this article, the reporting company shall file
50 with the department of state a beneficial ownership disclosure, and any
51 updates to such information, as may be applicable, identifying each
52 beneficial owner by: (1) full legal name; (2) date of birth; (3) current
53 business street address; and (4) a unique identifying number from an
54 acceptable identification document defined in 31 U.S.C. § 5336 (a)(1).
55 Provided, however, that where an initial report contains the information
56 required herein, a reporting company may submit a copy of the initial
A. 3484--A 3
1 report, submitted to the federal government pursuant to 31 U.S.C. §
2 5336, to satisfy the requirements of this section.
3 (b) All personal or identifying information of beneficial owners
4 provided to the department of state under this section not required to
5 be included in the business entity database pursuant to section one
6 hundred-b of the executive law, shall be deemed confidential except for
7 the purposes of law enforcement, or as otherwise required to be
8 disclosed pursuant to a court order. If confidential information associ-
9 ated with a beneficial owner is held electronically, such records shall
10 be encrypted or protected in a substantially similar manner. The
11 department of state shall, upon the filing of each beneficial ownership
12 disclosure, assign each beneficial owner of a limited liability company
13 an anonymized unique identifying number, which shall not be based on any
14 personally identifying number including but not limited to a social
15 security or tax identification number assigned to or associated with
16 such beneficial owner.
17 (c) (1) Each reporting company formed on or before the effective date
18 of this section shall file the information required under subdivision
19 (a) of this section; and each exempt company formed on or before the
20 effective date of this section shall file a statement signed by a member
21 or manager indicating the provision or provisions of 31 U.S.C. §
22 5336(a)(11)(B), excluding such company from the definition of a report-
23 ing company, with the department of state no later than January first,
24 two thousand twenty-five.
25 (2) A reporting company which has failed to file the beneficial
26 ownership disclosure as required by this section for a period exceeding
27 thirty days shall be shown to be past due on the records of the depart-
28 ment of state until an up-to-date beneficial ownership disclosure is
29 filed with the department.
30 (3) A reporting company which has failed to file the beneficial owner-
31 ship disclosure as required by this section for a period exceeding two
32 years shall be shown to be delinquent on the records of the department
33 of state after a notice of delinquency has been mailed to the last known
34 business address of such reporting company, and such company has failed
35 to file such information within sixty days of the mailing of such
36 notice. Such delinquency shall be removed from the records of the
37 department of state upon the filing of an up-to-date beneficial owner-
38 ship disclosure, and the payment of a civil penalty of two hundred fifty
39 dollars.
40 § 6. Paragraphs 7 and 8 of subdivision (a) of section 802 of the
41 limited liability company law are amended and a new paragraph 9 is added
42 to read as follows:
43 (7) a statement that the foreign limited liability company is in
44 existence in the jurisdiction of its formation at the time of the filing
45 of such application; [and]
46 (8) the name and address of the authorized officer in the jurisdiction
47 of its formation where a copy of its articles of organization is filed
48 or, if no public filing of its articles of organization is required by
49 the law of the jurisdiction of formation, a statement that the foreign
50 limited liability company shall provide, on request, a copy thereof with
51 all amendments thereto (if such documents are in a foreign language, a
52 translation in English thereof under oath of the translator shall be
53 attached thereto), and the name and post office address of the person
54 responsible for providing such copies[.]; and
55 (9) in the case of an exempt company, a statement signed by a member
56 or manager indicating the provision or provisions of 31 U.S.C. §
A. 3484--A 4
1 5336(a)(11)(B), excluding such company from the definition of a report-
2 ing company to file an initial report, or in the case of a reporting
3 company, the beneficial ownership disclosure information required pursu-
4 ant to section eight hundred ten of this article.
5 § 7. Section 804 of the limited liability company law is amended by
6 adding a new subdivision (c) to read as follows:
7 (c) In the case of a foreign limited liability company that is also a
8 reporting company, such reporting company shall amend its application
9 for authority upon any change in the beneficial owner information
10 required pursuant to section eight hundred ten of this article.
11 § 8. The limited liability company law is amended by adding a new
12 section 810 to read as follows:
13 § 810. Beneficial ownership disclosure. (a) When filing the applica-
14 tion for authority pursuant to section eight hundred two of this article
15 or filing any amendments to an application for authority pursuant to
16 section eight hundred four of this article, a reporting company shall
17 file with the department of state a beneficial ownership disclosure, or
18 any updates to such information, as may be applicable, identifying each
19 beneficial owner by: (1) full legal name; (2) date of birth; (3)
20 current business street address; and (4) a unique identifying number
21 from an acceptable identification document defined in 31 U.S.C. §
22 5336(a)(1). Provided, however, that where an initial report contains the
23 information required herein, such foreign limited liability company
24 shall submit a copy of the initial report such company submitted to
25 the federal government pursuant to 31 U.S.C. § 5336 in order to satisfy
26 the requirements of this section.
27 (b) All personal or identifying information of beneficial owners
28 provided to the department of state under this section not required to
29 be included in the business entity database pursuant to section one
30 hundred-b of the executive law, shall be deemed confidential except for
31 the purposes of law enforcement, or as otherwise required to be
32 disclosed pursuant to a court order. If confidential information associ-
33 ated with a beneficial owner is held electronically, such records shall
34 be encrypted or protected in a substantially similar manner. The depart-
35 ment of state shall, upon the filing of each beneficial ownership
36 disclosure, assign each beneficial owner of a foreign limited liability
37 company an anonymized unique identifying number, which shall not be
38 based on any personally identifying number including but not limited to
39 a social security or tax identification number assigned to or associated
40 with such beneficial owner.
41 (c) (1) Each reporting company formed pursuant to section eight
42 hundred two of this chapter, on or before the effective date of this
43 section shall file the information required under subdivision (a) of
44 this section; and each exempt company shall file a statement signed by a
45 member or manager indicating the provision or provisions of 31 U.S.C. §
46 5336(a)(11)(B) excluding such company from the definition of a reporting
47 company, with the department of state no later than January first, two
48 thousand twenty-five.
49 (2) A reporting company which has failed to file its beneficial
50 ownership disclosure as required by this section, for a period exceed-
51 ing thirty days, shall be shown to be past due on the records of the
52 department of state until an up-to-date beneficial ownership disclosure
53 is filed with the department.
54 (3) A reporting company which has failed to file its beneficial owner-
55 ship disclosure as required by this section for a period exceeding two
56 years shall be shown to be delinquent on the records of the department
A. 3484--A 5
1 of state after a notice of delinquency has been mailed to the last
2 known business address of such company and such company has failed to
3 file such information within sixty days of the mailing of such notice.
4 Such delinquency shall be removed from the records of the department of
5 state upon the filing of an up-to-date beneficial ownership disclosure
6 required by this section, and the payment of a civil penalty of two
7 hundred fifty dollars.
8 § 9. The executive law is amended by adding a new section 100-b to
9 read as follows:
10 § 100-b. Business entity database. 1. The secretary of state shall
11 maintain a publicly available database on its website for each business
12 entity organized in New York state and each foreign business entity with
13 authority to do business in the state, that includes but is not
14 limited to, the following information:
15 (a) the name of the business entity;
16 (b) the history of such name and changes to such name, where applica-
17 ble;
18 (c) the current business street address and the county associated with
19 such business street address;
20 (d) the duration or date of dissolution of the business entity, where
21 applicable;
22 (e) where the business entity is a limited liability company, the date
23 of initial filing of the articles of organization, or where the
24 business entity is a foreign limited liability company, the application
25 for authority;
26 (f) the date of the most recent filing;
27 (g) the filing history associated with such entity; and
28 (h) any other information pertaining to such business entity as may be
29 determined by the secretary of state and in accordance with applicable
30 state and federal laws, rules, and regulations.
31 2. (a) In addition to the information required to be included in the
32 database pursuant to subdivision one of this section, the secretary of
33 state shall also include the full legal name or names of each beneficial
34 owner, for every limited liability company and foreign limited liability
35 company where such companies are also reporting companies.
36 (b) The secretary of state shall establish, through regulations,
37 procedures to allow beneficial owners of limited liability companies
38 and foreign limited liability companies who are also reporting companies
39 who cite significant privacy interests to apply for a waiver to withhold
40 the name and/or business address associated of a beneficial owner from
41 the database established in subdivision one of this section where such
42 name and/or business address discloses personal or identifying informa-
43 tion of such beneficial owner, no amendment to such information miti-
44 gates such disclosure, and such disclosure serves no public interest.
45 Significant privacy interests shall include, but not be limited to,
46 where a beneficial owner is a natural person participating in an address
47 confidentiality program, or is a member of a limited liability compa-
48 ny acting as a relator in a qui tam action filed pursuant to section one
49 hundred ninety of the state finance law or 31 U.S.C. section 3729. The
50 secretary of state shall issue a waiver to a beneficial owner upon a
51 demonstration that a significant privacy interest exists and shall
52 provide guidance on its website indicating what documentation is accept-
53 able as proof for issuance of a waiver. If the secretary of state grants
54 a beneficial owner a waiver pursuant to this subdivision, the secretary
55 of state shall disclose the anonymized unique identifying number
56 assigned by the secretary of state to each beneficial owner or owners
A. 3484--A 6
1 pursuant to section two hundred fifteen or section eight hundred ten
2 of the limited liability company law, as may be applicable to the
3 database established in subdivision one of this section. The secretary
4 of state shall also provide information on its website regarding compli-
5 ance with beneficial ownership disclosure requirements and how and where
6 such information may be used and disclosed.
7 § 10. This act shall take effect on the three hundred sixty-fifth day
8 after it shall have become a law. Effective immediately, the addition,
9 amendment and/or repeal of any rule or regulation necessary for the
10 implementation of this act on its effective date are authorized to be
11 made and completed on or before such effective date.
