How can the EB-5 investor control the financial result of his investment?
Let's say someone has invested $500,000 in an enterprise through an EB-5 regional center. What happens to the amount invested if the condition of creating 10 jobs directly or indirectly has not been met after two years? How can the investor control the financial result of his investments - does he get dividends, etc.?
The first step is to chose an EB-5 compliant project and a financially viable investment. The immigration attorney can offer immigration due diligence on the legal compliance if the documents, while financial and investment advisers can offer due diligence on the viability of the project - namely history of the developer, manager, and operator. Also, it would be advisable for the project to offer an independent audit of how the investment funds are being used and in compliance with the construction budget, timeline and business and economic report.
An EB-5 investor has the same amount of control over the financial result of his investment as in any other at-risk investment. The agreements the investor signs with the project will determine profits/dividend distribution, but keep in mind that there is no guarantee that there will be any profit. An at-risk investment entails the prospect of gain and the risk of loss. Conducting sufficient due diligence prior to investing and considering that you might lose all of the principal are key factors in deciding where to invest your money, or whether to invest at all.
It depends on each EB-5 offering. Most have repayment procedures in place for certain failures, but failing to create the jobs is basically the risk of making the investment. Investments must be at risk.
Control the financial result of your investment by diligently reviewing the potential investment before making it, and then monitoring the business and exercising your management control. Before investing in a regional center, review all of the business documentation about the business, how it will be run and what your managing role will be. If you have already invested and had not reviewed all of the documentation, ask for all the documents and review those items now. Alternatively, hire a professional to do the diligence for you. Many regional centers operate as limited partnerships. Review all of your rights as a limited partner and exercise them. Be sure you can trace the use of money invested and identify the persons responsible for handling it. Or engage someone to monitor the business for you. If you see something different from the documentation you reviewed, speak up. Contact the regional center and ask questions. Request copies of monthly reports of the business as it develops and progresses. The EB-5 program requires that the investor's funds be at risk, but monitor the business so you are not subject to risks you had not assumed.
You need to review all offering documentation with an attorney for a project from the regional center in which you intend to invest. This will allow you to understand your rights as a limited partner generally; EB-5 investors are generally limited partners in a limited partnership in which the regional center is a general partner managing the partnership. Essentially, limited partners have no say in the management of the entity except policy formulation or changing the purpose of the partnership, or the decision to liquidate the partnership when its purpose has been fulfilled. You need to hire an EB-5 immigration attorney.
What happens to the amount invested if the condition of creating 10 jobs directly or indirectly has not been met after two years? You will have to argue that it will be created within a "reasonable period of time." The way you would establish that is a bit complicated and may depend on the USCIS policy at the time. The worst case scenario here, however, can mean that your I-829 will be denied and you will have to return to your home country upon the end of your conditional permanent residency. How can the investor control the financial result of his investments - does he get dividends, etc.? This will depend on whether you did a direct or regional center EB-5. If it is the former, then it would be based on the operating documents you established for yourself and your partners (if any). If it is the latter, then you won't likely have much control over the course of your investment. You will have some rights with regards to policy-making, but it won't be likely that you'll have any say in managing your investment.
The answer is no, you have no real control over a regional center. Each model is a little different, but essentially, you are loaning the regional center money, acting as a bank. If you are successful, maybe you get your money back and you get the green card. If they are not successful, you lose everything. Essentially.
John J Downey
This all depends on the agreements signed with the developers of the project and/or the regional center. You should have some provision agreed upon should the application fail because the requisite number of jobs were not produced. It is best to retain an attorney well-versed in the EB-5 program before you begin negotiations.
The best way to control the financial results of the investment is to make a sound investment decision at the outset with reputable developers and business executives. As a practical matter, when you invest in an EB-5 regional center project, just like when you invest in the stock market, you do not have any managerial control. If the jobs are not created, then you are at risk in terms of the removal of your conditional permanent residency. For that reason, the best answer is to make a sound investment decision at the outset. Very few regional center projects pay dividends, but it depends upon the particular project.
Its critical to do due diligence before investing. Some regional centers are good in reporting, but many are not. We may see new integrity measures enacted that will require audits and reporting as an investor protection mechanism.