The Boards of homeowner associations, condo associations and other residential real estate community associations are learning about what the Corporate Transparency Act will require of them.
- Each association will need to file an initial beneficial ownership information (BOI) report before January 1, 2025.
- Each BOI report will need to contain specific items of personally identifiable information (PII) about each board member.
Preparing and filing the report by the end of 2024 deadline will require associations and their board members to coordinate on data collection, reporting preparation and filing.
And yet, some associations are finding some board members are reluctant or unwilling to provide their PII for BOI report filing. When that happens, association leaders find themselves in a conundrum: the association cannot file without its BOI report unless it is complete, but the BOI report cannot be complete without cooperation from each association board member.
So what should the association board do if one member is unwilling to provide PII for the BOI report?
A Board Member’s Legal Duty
Although each association has a duty to file a BOI report, FinCEN’s regulations impose personal criminal liability on any person who causes a reporting company to fail to file its BOI report when required. Consequently, if an association is unable to file a complete BOI report because of an uncooperative board member, that board member may be personally criminally liable for that failure.
FinCEN confirmed its interpretation of its regulations in FAQ K.3. when it wrote, “an enforcement action can be brought against an individual who willfully causes a reporting company’s failure to submit complete or updated beneficial ownership information to FinCEN. This would include a beneficial owner or company applicant who willfully fails to provide required information to a reporting company.”
If an association board finds it is unable to file because an individual board member is uncooperative, the board should bring the prospect of personal liability to the uncooperative member’s attention. Perhaps the board member will have a change of heart or decide to resign from the board.
If the uncooperative board member resigns, the remaining board members would be free to file a BOI report that included all the required information.
Removing Uncooperative Board Members
Another alternative some boards may need to consider is the potential for removing an uncooperative board member from office. If the uncooperative board member won’t comply despite the risk of personal liability, and is unwilling to resign, the board may need to expel the uncooperative board member.
Whether this is a feasible approach will depend on the association’s bylaws and the corporate laws in the state where the association is organized.
- An association’s bylaws will often include provisions that govern how board members can be elected and removed from office.
- If an association board wants to remove a board member from office, the board will need to follow the relevant provisions in the bylaws.
If the association’s bylaws contain no provisions for removing board members, the board may need to consider amending its bylaws or taking another action as permitted by their state’s non-profit corporation code.
- Whether (and how) the board can amend the bylaws will depend on what is permitted in the non-profit corporation code or state property association code.
- Because decisions like this can create legal rights and obligations, the association should consult an attorney before taking any of these steps.
Fostering Trust with Board Members
The problem of the uncooperative board member can spring from different sources. What can help, though, is utilizing a filing system that fosters trust that each board member’s information will be kept secure and confidential.
The FinCEN Report Company’s filing system was built to ensure trust in data security. The system is built on an AWS encrypted hosting platform that ensures data remains encrypted both at rest and in transit. FinCEN Report Company has also implemented data security requirements that have been audited by an independent accounting firm, resulting in a successful SOC-2 Type I report.
In its patent-pending process, each board member will have a personal data account in the system. A board member’s personal data will only be viewable and editable by that individual. As a result, a board member’s PII can be included in the BOI report without any other individual being able to see the board member’s PII.
Board members who are reluctant to include their PII in the association’s BOI report may change their minds when they understand how their data will be kept confidential and secure through the FinCEN Report system.
