HNWI Obtaining EB-5 U.S. Permanent Residency By Investment During the Pandemic

 

A New Favorable Financial Dawn For Investors

 

During these unusual times, with the pandemic, economies and individuals suffering financially, many High Net Worth Investors (HNWI) are contemplating obtaining residency in more favorable countries, such as the U.S.

 

In the U.S., there are signs of recovery in certain industries as well as improvements in the health care system.

The HNWI may desire to obtain a U.S. temporary investor visa (E-2) by buying a U.S. business or franchise for $150,000 ( as an example) to enter the U.S. in a matter of months with their families. Subsequent to the E-2 entry the HNWI may file an EB-5 petition to obtain U.S. permanent residency by investing capital in a new commercial enterprise.

 

To file an EB-5 investor petition the minimum investment amount of capital is USD $900,000 if invested in a area of high unemployment, a TEA (Target Employment Area) or Rural Area, or if not in those areas the minimum investment shall be USD $1.8 million.

 

Because of these difficult economic times, the HNWI may not desire to invest the total required full amount of capital when they file the EB-5 petition, to start the Permanent Residency process.

 

The current U.S. Immigration Service bureaucratic time delay for processing the I-526 petitions may be between 2 to 4 1/2 years. There are legal actions which may be initiated, in order to obtain a quick approval from the U.S. immigration service, if the EB-5 petition process is taking more than 24 months.

 

This Article will address the legal basis upon which the foreign nationals ( HNWI) at the time of filing the EB-5 petition can commit a smaller first investment amount and thereafter in an installment plan make monthly payments ( no more than 24 months) to reach the full investment required amount. Once the petition is approved then the HNWI may apply for U.S. conditional permanent residency.

 

Therefore the good news is that the 24 month installment process may take the same amount of time as the processing time of the EB-5 petition.

 

In fact, under certain legal circumstances the HNWI may use the initial E-2 investment amount towards the required EB-5 investment amount.

 

The EB-5 Laws, Regulations, and Policy Manual describes the regulatory definition of capital as including cash, indebtedness such as promissory note secured by assets owned by the immigrant HNWI investor in which the immigrant investor is personally and primarily liable. The immigrant investor must establish that he or she is the legal owner of the capital invested. Matter of Ho, 22 I&N Dec. 206 (Assoc. Comm’r 1998).

 

Please note at the I-526 Petition filing date, to be “invested or actively in the process of investing,” the immigrant investor must demonstrate his or her irrevocable commitment of the required capital to the EB-5 New Commercial Enterprise NCE /JCE Job Creating Entity, but need not establish that the full amount already has been transferred to the New Commercial Enterprise/JCE. It is sufficient if the immigrant investor demonstrates that he or she is actively in the “process of investing” the required capital, with proof of the irrevocable commitment at the time of filing the I-526 petition.

 

Therefore, an EB-5 investor may commit EB-5 investment funds through a combination of cash as a first deposit and a Promissory Note. For example, the EB-5 investor may deposit and therefore irrevocably commit USD $200,000 cash into the NCE and thereafter made available to the Job Creating Entity (“JCE”). The NCE/ JCE may be the same or different corporate businesses.

 

If the investment requirement is USD $900,000, then the balance of USD $700,000 can subsequently be transferred by the HNWI to the NCE/JCE on the basis of a Promissory Note and installments.

 

Hence, capital can include the immigrant investor’s promise to pay, as long as the immigrant investor is personally and primarily liable for the promissory note debt and his or her assets adequately secure the note. Any security interest must be perfected to the extent provided for by the jurisdiction in which the assets are located. The secured assets must be fully amenable to seizure by a U.S. noteholder (the NCE/JCE).

 

The steps are, the EB-5 investor must first prepare and execute a promissory note in favor of the NCE/JCE pursuant to which the investor is irrevocably committed to pay the balance remaining on either $900,000 US or $1.8 million US, during the following “Two Year” period .

 

In order to collateralize the EB-5 investors’ irrevocable commitment for the full amount owed, the promissory note shall be held by the NCE/JCE, secured by liquid assets and/or by a first priority security interest encumbering liquid securities accounts and/or deposit accounts owned by the investor that are maintained at a reputable and insured financial institution domestic or foreign.

 

The investor must tender to the NCE/JCE a properly perfected, first priority lien encumbering such assets and/or accounts under all applicable state, federal and local laws in force at the time in the domestic or foreign jurisdictions where such assets and/or accounts are physically and geographically located.

 

The cash deposit, coupled with the investor’s promissory note fully secured by a properly perfected pledge of assets and/or securities and/or deposit accounts, satisfies the “process of investing” concept authorized by applicable EB-5 laws, regulations and policies.

 

This financial strategy will be a new dawn and welcomed by the Foreign National investor who desires to obtain U.S. permanent residency during these difficult economic times.

 

Author: Edward C. Beshara, Managing Partner, Beshara Global Migration Law Firm, USA