Board members need to comply with transparency act
Q. Our management company just advised our condominium board about the Corporate Transparency Act. They were rather light on details. From what little we were told, the personal information required appears rather intrusive, and may potentially be another source for identity theft, regardless of the supposed level of security. I understand this act is an attempt to reduce/prevent fraud. Can you address the requirements of this act, and any possible repercussions for board members.
A. The Corporate Transparency Act (“CTA”) is a federal law requiring certain corporations or “reporting companies” to disclose ownership information to the Financial Crimes Enforcement Network (“FinCEN”), a Bureau of the U.S. Department of the Treasury.
The CTA does impact community associations. As defined by the CTA, the term “reporting companies” encompasses corporations. Since most community associations operate as nonprofit corporations, they are included within the scope of the CTA’s requirements.
The CTA does impact board members. As defined by the CTA, a “beneficial owner” is any individual who, directly or indirectly, exercises “substantial control” over the community Association and is an “important decision maker.” This includes the board members.
There is a deadline to comply with the CTA. Community associations incorporated prior to Jan. 1, 2024, must comply with the CTA’s requirements by Jan. 1, 2025.
Each “beneficial owner” (board member) must complete specific reporting documentation and provide FinCEN with their full legal name, date of birth, current address and a unique identifying number from an acceptable government issued ID (e.g., driver’s license, passport.)
Further, the CTA specifies that FinCEN must be updated within 30 calendar days if there are changes to the community association’s board of directors.
Board members are advised to consult with their association’s attorney to start their preparations immediately. Community associations cannot ignore the impact of this new law and will need to demonstrate a sense of urgency to comply with the CTA by the Jan. 1, 2025, filing deadline.
Information collected by the association’s attorney, and transmitted to the U.S. Department of the Treasury, should be done so in a secure manner, and the information collected should be destroyed by the association’s attorney once submitted.
There are penalties for violating the CTA. An individual who violates the CTA’s requirements may be subject to civil penalties of up to “$500 for each day that the violation continues” along with “criminal penalties of up to two years imprisonment and a fine of up to $10,000.”
Q. I live in a small common interest community that is self-managed. Over the course of several years, the board is holding fewer and fewer meetings for the members. In the past, we would meet quarterly including the annual meeting. My question, aside from the annual meeting, is the board required to hold quarterly meetings for the members based on the Illinois Common Interest Community Association Act?
A. Under Section 1-30(a) of the Illinois Common Interest Community Association Act, the board of directors of a common interest community association must meet at least four times annually.
However, there is no minimum number of member meetings that must be held annually. Further, it is possible that there are no member meetings, including an election meeting, in a particular year. Section 1-25(a) of the Illinois Common Interest Community Association Act addresses this. “Elections shall be held in accordance with the community instruments, provided that an election shall be held no less frequently than once every 24 months, for the board of managers or board of directors from among the membership of a common interest community association.”
Unless there is an issue that requires member approval, or a meeting to elect directors, there isn’t really a “legal” need to hold member meetings. If the board wants to keep owners updated on matters, in a meeting setting, it could certainly do that at one of the board meetings.
• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.