Current Month (October 2025)
Bearing Witness to the CTA’s Dead(ish) Hand
By William E. H. Quick, Polsinelli PC
An update on the Corporate Transparency Act, and its lingering obligations.
Corporations are generally permitted (but not required) to issue fractions of a share of stock, often in the form of scrips or warrants. Delaware, earlier this year, adopted certain revisions to its General Corporation Law, one of which removed the previous reference to the ability of Delaware corporations to issue scrips or warrants “in bearer form.” See 85 Del. Laws ch. 48 (S.B. 95, 153rd Gen. Assemb.) (2025) and 8 Del. C. § 155. Legislative history and commentary associated with this amendment identifies the Corporate Transparency Act (“CTA”) as the impetus for this change.
The CTA provides as follows:
No Bearer Share Corporations or Limited Liability Companies. A corporation, limited liability company, or other similar entity formed under the laws of a State or Indian Tribe may not issue a certificate in bearer form evidencing either a whole or fractional interest in the entity.
31 U.S.C. § 5336(f) (emphasis added)
As noted in previous installments of this column, the Financial Crimes Enforcement Network (“FinCEN”) adopted an Interim Final Rule earlier this year that narrowed the beneficial ownership information (“BOI”) reporting requirements under the CTA to require only “foreign reporting companies” to report BOI, and even then only BOI for non-U.S. individual beneficial owners. The immediate reaction of the business community was to move on from considering the CTA in its totality. However, as noted above, some aspects of the CTA remain, and remain enforceable against U.S. business entities, beyond the publicized CTA reporting obligations.
Certain categories of business entities and business models are particularly susceptible to these continuing implications. Of note, the prohibition on “bearer” ownership is in direct opposition to entity structures favoring anonymity, such as decentralized autonomous organizations (“DAOs”) that are operated through business entities established through state law filings. Because DAOs typically operate through the blockchain and smart contracts, structuring a DAO to adopt procedures to require owner disclosure may be problematic because ownership transparency is the opposite of many DAOs’ compelling feature—anonymity.
Because business entities are juridical persons formed pursuant to state or tribal statutes that dictate the formalities of ownership, it is unclear how state or tribal governments will enforce the CTA’s prohibition on certificates in bearer form. Delaware’s legislature, however, has now stepped into this breach through its amendment to the Delaware General Corporation Law, which affects a significant portion of the nation’s business community.
This seemingly esoteric topic, bearer script and warrants, and its level of statutory drafting minutia hit on a lingering issue faced by the U.S. business community associated with the CTA and its present status: it’s not dead yet.
