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How would one investor dropping out of a project affect my EB-5 application?

I am an EB-5 investor living in Shanghai. I am investing into a U.S.-based project alongside non-EB-5 investors. If one of these investors decides to drop out of the project and pull its funds, how would that affect my application?

Answers

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    Julia Roussinova

    Immigration Attorney
    Answered on

    Generally, larger projects experience this issue routinely and almost always have replacement EB-5 investors available, so this should not affect you. However, you should consult your specific project and your immigration attorney for more information whether this may create material change issues or job creation issues.

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    Michael A Harris, Esq

    Immigration Attorney
    Answered on

    It really depends on the capital stack of the project you invested in. The capital stack defines the sources and uses of the investment capital, loans and other financing options that are being contributed to the project. Losing a non-EB-5 investor in the project could be an issue if there is not a way for the capital needed for the project to be supplemented elsewhere. In terms of whether you succeed or fail as an EB-5 investor depends on various issues, such as whether there will be a material change in the project as a result due to the shortage of funds. The largest issue you could face would be a decrease in the number of jobs created in the project. If there are no longer 10 or more jobs as forecasted, then this could lead to a problem. Best to discuss with a lawyer who specializes in EB-5 matters.

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    Debbie Klis

    Securities Attorney
    Answered on

    This is a great question. The good news is the replacement of one or more investors in a project, whether EB-5 or non-EB-5 investors, is not deemed a material change. So, on the rare occasion of a withdrawal of a non-EB-5 investor after an investment, the USCIS would not attach jeopardy to the project as a result. Withdrawal by non-EB-5 investors is rare because, typically, subscription agreements for private securities offerings do not permit withdrawals for non-liquid investments such as real estate. Once the money is in the deal, it is difficult to cull the funds to redeem the withdrawing investor. I hope this answer is helpful.

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    Charles Foster

    Immigration Attorney
    Answered on

    If one of the investors in your EB-5 regional center project drops out it should not affect your individual EB-5 Investor Petition on Form I-526. When you file such a petition, the regional center/project developer may be in the middle of raising money from other investors. In the case of someone dropping out, it simply means they have to raise money from one additional investor or substituted investor if the project is already fully subscribed.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    It should not affect your application unless that results in the project folding.

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    Dale Schwartz

    Immigration Attorney
    Answered on

    As long as the project can continue, it should not affect your case.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    There is no reason why the withdrawal of another investor should negatively affect your investment. However, to assure yourself, take the following few steps: check any investment agreement before you sign on to any project and conduct good due diligence before you proceed. Also, consult with an EB-5 attorney for further guidance.

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    Natalia Polukhtin

    Immigration Attorney
    Answered on

    More information is needed to answer your question but, hypothetically speaking, a non-EB5 investor pulling out his investor funds may cause a reduction in jobs created by the project. If this is the case, your petition will be denied.

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    Irina Rostova

    Immigration Attorney
    Answered on

    That depends if the investor''s withdrawal would: (1) cause a material change in the project and/or (2) would affect the job creation. These points need to be analyzed by the attorney and the economist of the project.

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    It should not affect your application unless the whole project fails due to not meeting the required funds. Usually, regional centers are ready to offer to other investors who were looking to invest in earlier projects and could replace the dropped-out investor quickly.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    The answer depends on whether the project has alternate sources of funding (i.e., additional developer equity, traditional financing, mezzanine loans, etc.) to make up the difference. If the project can still show sufficient funds to complete the project, the departure of one or more non-EB-5 investors (or even EB-5 investors) may not doom the project or your I-526 petition. You should consult with an experienced EB-5 immigration attorney to make sure your legal interests are protected no matter what transpires.

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    Barbara Suri

    Immigration Attorney
    Answered on

    If you mean an investor may withdraw his funds and the investment cannot go forward because they are short of funds, that situation should be covered in the contract per the investment. I would guess that your money would be returned to you from escrow.

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    Belma Chinchoy

    Immigration Attorney
    Answered on

    If the company has access to other funds to continue its operations and implement the BP, it will not affect you.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    Depending on the size of the project, it should not matter. On bigger projects, this happens routinely.

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