Three pillars of an effective corporate compliance program include prevention, detection and response.
Prevention of Compliance Program Problems involving the Business Jet
When you acquire the company jet, those involved in the purchase and the structure of the ownership and operation of the plane worked to prevent unnecessary risk by identifying the applicable FAA regulations, tax laws and business issues to address.
Detection of Risks in your Business Jet Compliance Program
A compliance officer can detect new risks as company facts and operations change, by holding periodic reviews of the company jet operations involving the aviation department, risk officer, legal, tax, bookkeeping/payables, aviation tax advisors, and outside aviation counsel.
What to Review
Have the aviation department describe:
- Which planes business passengers utilize
- Passengers who traveled on the plane during the prior year
- On what entity’s business each passenger traveled
- Whether there are any personal use passengers
- Whether any dry lease, timeshare, interchange, pilot service or management agreements exist in connection with the plane
- Whether there are any amendments to any dry lease, timeshare, interchange, pilot service or management agreements
- The most frequent destinations
- Where the aircraft spends a lot of time, other than its primary hangar location
- Whether anyone other than company employees on business trips utilizes the plane
- Whether the plane is chartered to third parties
- What company the FAA registration names as the registered owner of the company jet
- Have they blocked tracking of the aircraft
- Does the company ever charter and aircraft owned by a company executive
Have the accounting department describe:
- What invoices were received and paid each month
- Whether any changes to their payment process or payees were made during the prior year
- Whether anyone reimburses the company for flights on the company jet
Have the legal department describe:
- Is the registered owner of the aircraft in good standing
- Whether any changes occurred in ownership or management of the entity which is the registered owner of the aircraft and if so, what those changes are and when they occurred
- Whether the entity for which the passengers are traveling still exists, has a business purpose (other than operating the plane) and is the proper entity on which those passengers should be traveling
- Whether any changes in ownership, management or business operations are planned for the entities involved in the ownership or operation of the aircraft
Have the risk department describe
- Who the aviation liability insurance covers
- Who is the loss payee on the aviation hull (physical damage) insurance
Response
Everyone involved should ask questions. Outside aviation counsel and aviation tax advisors may want to review some documents or obtain copies of tax filings. At a follow-up meeting everyone can discuss any changes required due to tax, regulatory or business needs. Acting on the results of the periodic review will help continue to mitigate risk.
Michelle M. Wade is an attorney with the law firm of Jetstream Aviation Law and counsels clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.