A Rose By Any Other Name - May Not Be So Active Management

by Matt Gordon

In the lone amendment of S. 744 passed by voice vote in committee on May 16, 2013, was a potentially important and equally easy to overlook change to the section heading in section 4805.* Previously the section was entitled, “Alien Entrepreneurs”, which pursuant to the amendment was struck and replaced with the heading “Employment-Based Immigrants”.*

This seems to imply a very important shift in the legislative intent for post-investment activity by the petitioner.* 8 CFR §204.6 (j) requires that petitioner show proof that he or she “… is or will be engaged in the management of the new commercial enterprise, either through the exercise of day-to-day managerial control or through policy formulation, as opposed to maintaining a purely passive role in regard to the investment.”

The new section heading implies a clear departure from the intent that the petitioner actively manages the business which is the recipient of his or her investment capital. According to the Merriam-Webster dictionary, an entrepreneur is “one who organizes, manages, and assumes the risks of a business or enterprise.”* The existing requirements of subsection (j) were entirely consistent with this definition.* The new section heading, “Employment-Based” is both in the passive voice and result oriented.* The heading says nothing about who creates or manages the business that creates the employment.* Further, so long as the desired employment is created by the new commercial enterprise that is the recipient of the petitioner’s investment capital, the petitioner would satisfy the policy mandate of being an ‘Employment-Based Immigrant’.

Of the many changes and improvements offered by S.744 for the EB-5 program, this in particular, holds the potential to provide additional pathways to apply EB-5 capital to business models which, under the existing regime, would be far more difficult.

About The Author

Matt Gordon is a the Managing Director of E3 Investment Group. He is a finance professional whose vision and passion is to help realize extraordinary value through the flawless planning and execution of strategy, financings and transactions that foster aggressive sustainable growth. Mr. Gordon is a licensed attorney, having practiced law with some of the most prestigious Wall Street firms, including Fried Frank and Sullivan & Cromwell. He is a member of the New York State Bar and holds SEC securities licenses.

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