By Lori Smith
"December 19, 2023 - The last 18 months have been a challenging time for private equity and venture capital funds and their portfolio companies across the globe, impacting the availability and cost of capital, deal valuations and exit opportunities. High inflation, rapidly increasing interest rates, volatility in the public equity markets, the collapse of certain banks that support the PE and VC ecosystem and significant reductions in valuations of portfolio companies post-pandemic has led to massive economic challenges; U.S. and global political unrest has created uncertainty in the markets; and unions across the United States have led strikes driven in part by the current macroeconomic environment as well as innovative technologies that are changing the way that many companies do business.
Despite these challenges, moving forward to 2024, many are predicting some uptick in investment and mergers and acquisitions activity. The legal and compliance landscape is evolving in a way that must be considered in pursuing such transactions. U.S. laws are trying to adapt as rapidly as possible to an ever-changing environment to balance protection for workers, consumers and innovators with the need to allow the world and technological innovations to evolve and improve the way we live and do business.
The first of this two-part series explores key items that should be on the radar of private equity (PE) and venture capital (VC) funds and their portfolio companies for 2024 and beyond — including novel reporting obligations for U.S. and foreign businesses and a continued increase in antitrust enforcement.
CTA creates new reporting requirements
Historically, U.S. and foreign entities doing business in the United States had minimal, if any, legal compliance reporting obligations as to their ownership. Most states do not require any information at the time of formation or when filing annual reports regarding the owners, officers, or directors of an entity. This is in vast contrast to laws in other countries. Based on concerns over illegal activity such as money laundering, terrorism financing and other criminal activity engaged in through shell companies, the U.S. requirements are changing effective Jan. 1, 2024.
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