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


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.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.