How will issues with an EB-5 investor”s application affect a regional center project?

Many projects have some kind of repayment of investment funds if an investor is denied and fails to exhaust administrative remedies to obtain approval. In addition, new investors can take the place of the denied investor. Please work with an experienced EB-5 attorney as these situations will affect timelines, marketing, etc.

It really depends how you negotiate with the regional center. For example, most agreements between a regional center and an EB-5 investor these days require the regional center to refund the $500,000 investment, and either the full or partial administrative fee at the time of I-526 denial. So you could find yourself scrambling for money to pay back the regional center and the investor.

An investor''s petition may be denied based upon lack of proof of the legal source of their investment funds. On this basis the denial should not effect the EB-5 project especially if the investment funds remain with the project. However, if the investors petition is denied based upon the non-compliance of the project-required documentation, then the continuation of the project as an EB-5 model will be effected.

In general, if an investor''s I-526 application is denied, the project has to return the capital investment to the investor. This is an issue you would discuss with your immigration and securities counsels and it has to be addressed in your project''s PPM. Receiving denials, however, is preventable. You should work closely with the investors'' immigration attorneys to make sure only investors with solid source of funds subscribe to your project. You can also require that your immigration counsel review all source of funds reports before I-526 petitions are filed. It is essential to have an experienced immigration attorney prepare and/or review source of funds reports.

The biggest issue to worry about is not getting the necessary funding for the project as most of the investors will want their money in escrow pending the adjudication so that they could get their money back if they get denied. Many of the more experienced regional centers with successful track record on multiple EB-5 projects will release the funds earlier than approval if certain elements are triggered, but most, if not all of them, state that the investment funds will be refunded if the I-526 is denied.

When an EB-5 investor transfers the $500,000 to a regional center, most keep the money in escrow until at least one I-526 has been approved. Once that happens, they transfer the money to the project. The idea here is that if one I-526 petition is approved, then it means that the documentation associated with the project has been accepted by USCIS and if subsequent I-526 petitions are denied, then it is because of the source of funds issue (which is a problem with the investor). Many regional centers will return the money to an investor (less the fees) if the I-526 petition is not approved so you should check with the regional center you plan to affiliate with.