How can I set up an EB-5 project where the escrow and LLC accounts are one in the same? - EB5Investors.com

How can I set up an EB-5 project where the escrow and LLC accounts are one in the same?

Let”s say we have a project where EB-5 funds are wired into escrow. When these funds are disbursed from escrow, do they have to go to another account for the LLC or can they go directly to the JCE? Is it possible to set up a project where escrow and LLC accounts are one and the same and still create a membership interest for those in the LLC?

Answers

Fredrick W Voigtmann

Fredrick W Voigtmann

Immigration Attorneys
Answered on

The invested capital must be invested in the new commercial enterprise. If an escrow account is used, best practices dictate that the funds should be transferred to the NCE account before going to the JCE.

Charles Foster

Charles Foster

Immigration Attorneys
Answered on

Normally, an escrow account would be an account set up in a particular bank that handles escrow accounts. In our experience, there are relatively few banking institutions that would do what you are suggesting. Clearly, whether or not the accounts are in the same bank or in different banks, the job creating entity would have a separate account and these would never be the same account. Depending upon how your project is established, the funds may be held in the escrow account until the EB-5 Investor Petition on Form I-526 is filed or approved. So, no it is not possible for the escrow and job creating entity accounts to be one and the same.

Debbie Klis

Debbie Klis

Securities Attorneys
Answered on

This is a very interesting proposition. The escrow account is a business decision of the regional center to give comfort to investors that a critical mass of funds would be raised before a first closing occurred. With the newest USCIS policy memorandum issued in November 2016, it is unlikely that escrow accounts will be used much going forward. Regarding your questions, when an escrow account is used, the USCIS wants to see the paper trail from the escrow account to the LLC (the NCE/issuer) and then from the LLC to the project. To set up an EB-5 project where the escrow and LLC accounts are one in the same, you could have the escrow account operate out of the LLC operating account with a custodian appointed to monitor the release provisions. I hope this response was helpful.

Peter Zhang

Peter Zhang

Immigration Attorneys
Answered on

I would recommend not doing that. And also I do not think the bank would permit this type of operating structure. It is easy to set up another account and cleaner for accounting purposes.

BoBi Ahn

BoBi Ahn

Immigration Attorneys
Answered on

The reason to have an escrow account is to assure investors that the money is being held outside of the control of the Regional Center and the release of the funds conditioned on an event (i.e., I-526 EB-5 Petition approval, filing, etc). If they are placed in the same account, it would defeat the purpose of having an escrow account.

Robert V Cornish Jr

Robert V Cornish Jr

Securities Attorneys
Answered on

The reason you have an escrow account is to make sure that money is transferred over when certain conditions are met to the satisfaction of a legitimate escrow agent. What you have proposed is what has caused trouble in the past with sponsors of EB-5 projects, some of which are being investigated by the SEC. Furthermore, I do not know of any attorneys who would draft a PPM for a deal structured without legitimate, independent escrow. Do yourself and your investors a favor: hire an escrow agent and use an escrow account.

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