Guidelines for Redeployment of EB-5 Capital
One of the hottest topics in EB-5 is the requirement of a new commercial enterprise (“NCE”) to sustain the investors’ funds “at risk” following the payoff of a loan by the job creating enterprise to the NCE. This issue will be of increasing importance as more and more 5 and 6 year loans are paid off while Chinese investors with a quota backlog have to wait 8 to 10 years or longer before they can receive a return of their invested funds from the NCE.
By way of background, USCIS has stated its policy that EB-5 investment capital is required to remain “at risk” in the NCE until each EB-5 investor’s I-829 petition is adjudicated. This has precipitated the need for the NCE to “redeploy” the invested funds. However, USCIS has provided no guidance on what requirements the redeployed investment is required to meet, other than that it must meet the definition of “at risk”.
This is a critical issue for investors, who would like to know from the time of investment (a) where their money will be redeployed and (b) that there is some assurance that their money will be at the least level of risk possible consistent with the requirements of EB-5 law and policy. It is also critical for investors in deals started before the backlog who did not consider the need for redeployment at the time of investment.
Because of the importance of this issue, Klasko Immigration Law Partners has collaborated with two top securities law firms to author a White Paper to edify our clients and, hopefully, USCIS as it finalizes its policy.
The authors of this White Paper have undertaken the task of proposing a set of standards and guidelines for redeployment of EB-5 investment capital. It is our hope that the principles of redeployment stated in this White Paper will be accepted by USCIS and by the EB-5 investment community. We believe that the standards expressed in this White Paper should meet the “at risk” requirements established by USCIS, and should also meet the requirements of federal securities laws and the fiduciary duties of the general partner or manager of each new commercial enterprise when making a decision to redeploy the investment capital in a new investment. We acknowledge that this is an evolving issue and that new developments may occur that require changes in these proposed standards and guidelines. At the same time, we believe it is important to the EB-5 community that these standards and guidelines be offered as a model now, so that new commercial enterprises have a basis for analyzing their options when the need to redeploy their investment capital becomes a reality.
Klasko Immigration Law Partners, LLP
Arnstein & Lehr LLP
Jeffer Mangels Butler & Mitchell LLP