USA Trends and Developments Contributed by: Frank Cannone, Michael Lubben, Peter Flägel and Thomas Rezach, Gibbons P.C.
affected sectors. Focusing on inflation specifi - cally, any slowdown in progress toward lowering inflation could affect the optimism for lowered interest rates, impacting valuations in advance of funding rounds. The continued rise of AI and generative AI As mentioned herein, AI was a driving factor in the venture market’s resurgence in Q4 2024. As we move into 2025, this is expected to rise as generative AI companies look to push into the realm of what is becoming known as “System 2” , emphasising reasoning-based responses during inference rather than pulling information from models for quick responses (the method relied on by ChatGPT, for example). 2025 will surely see the rise of these reasoning-based models, leveraging advanced capabilities to enable complex problem-solving across many major industries. In early 2025, OpenAI and Google are develop - ing and stabilising models to pave the way for further advancement in this area. This is a cru - cial change as it relates to venture capitalists, as it will lead to a change in methodology related to companies into which venture capitalists will seek to deploy capital. US Corporate Transparency Act reporting regulations The Corporate Transparency Act (CTA) came into effect in January 2024 and created an obli - gation for domestic entities and foreign entities
that are registered to do business in the United States, unless exempt, to report beneficial own - ership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a branch of the US Department of the Treasury. The reporting obligations serve to combat fraud, drug traffick - ing, corruption, tax evasion, organised crime or other illicit activities. Because many emerging companies will not meet the exemption requirements under the CTA and will have to obtain information from their investors to meet the reporting obligations, they are advised to begin assessing their report - ing obligations early, and investors will want to ensure that companies in which they invest com - ply with the CTA. The CTA is currently the subject of various legal challenges, and the filing deadline has been pushed back several times already. On 27 Feb - ruary 2025, FinCEN announced that it will not impose fines, penalties or enforcement actions against any companies for failing to file or update BOI reports required under the CTA. It is unclear at this point whether FinCEN will issue any new rules about filing deadlines or report - ing requirements, with the Treasury Department already announcing that it will not take enforce - ment action against Americans or domestic companies who fail to file ownership information under the law. Regardless, emerging companies should pay close attention to the CTA develop - ments to ensure compliance.
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