Can I Use Preferred Stock in An EB-5 Offering?

EB-5 Offering - Going Public Lawyer

The purpose of the EB-5 Offering Program is to promote the immigration of people who can help create jobs for United States workers through their investment of capital into the United States economy. Immigrants who invest their capital in job-creating businesses and projects in the United States receive conditional permanent resident status in the United States for a two-year period. The EB-5 Offering Program is being used more and more frequently in going public transactions.

After two years, if the immigrants have satisfied the conditions of the EB-5 Offering Program and other criteria of eligibility, the conditions are removed and the immigrants become unconditional lawful permanent residents of the United States.

The EB – 5 Offering Program is based on three main elements: (1) the immigrant’s investment of capital; (2) in a new commercial enterprise; (3) that creates jobs. The word “capital” in the EB – 5 Program does not mean only cash. Instead, the word “capital” is defined broadly in the regulations to take into account the many different ways in which an individual can make a contribution of financial value to a business. The immigrant investor in the EB – 5 Program is required to invest his or her capital. The petitioner must document the path of the funds in order to establish that the investment was his or her own funds. Matter of Izummi , 22 I&N Dec. at 195. The regulation defines “invest” as follows: Invest means to contribute capital. A contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement between the alien entrepreneur [immigrant investor] and the new commercial enterprise does not constitute a contribution of capital. 8 C.F.R. § 204.6(e). A loan to a company will not suffice.

The regulation also provides that, in order to qualify as an investment in the EB – 5 Offering Program, the immigrant investor must actually place his or her capital “at risk” for the purpose of generating a return, and that the mere intent to invest is not sufficient. The regulation provides as follows: To show that the petitioner has invested or is actively in the process of investing the required amount of capital, the petition must be accompanied by evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk. Evidence of mere intent to invest, or of prospective investment arrangements entailing no present commitment, will not suffice to show that the petition is actively in the process of investing. The alien must show actual commitment of the required amount of capital. 8 C.F.R. § 204.6(j)(2). The law does not specify what the degree of risk must be; the entire amount of capital need only be at risk to some degree.

The statute governing the EB – 5 Offering Program provides that the immigrant investor must invest at least $1,000,000 in capital in a “new” commercial enterprise that creates not fewer than ten jobs. The EB – 5 Offering Program defines “new” as “established after November 29, 1990 or a company that will be restructured or expanded through the immigrant investor’s investment of capital. An exception exists if the immigrant investor invests his or her capital in a new commercial enterprise that is principally doing business in, and creates jobs in, a “targeted employment area.” In such a case, the immigrant investor must invest a minimum of $500,000 in capital.

Since the EB-5 Offering Program requires the immigrant investor to be engaged in the management of the commercial enterprise, either through the exercise of day-to-day managerial responsibility or through policy formulation. It is not enough that the immigrant investor maintain a purely passive role in regard to his or her investment. 8 C.F.R. § 204.6(j)(5). This is where companies with preferred stock offerings come into use because they provide evidence for the USIC that the immigrant investor is a corporate officer or a member of the corporate board of directors and has a role in the management decision and policy making activities. Preferred stock in a company that specifically, has warrant date beyond the two year requirement, are ideal for investing in a non-regional center because the capital is at risk, the job creation element will be ascertainable, and the investor will be involved in policy formation and/or management decisions by having voting rights to show a proactive role in the company. This type of approach can be complicated and before investing with any program or company you should speak with an experienced EB-5 Offering securities lawyer capable of handling the nuisances of securities and immigration law.

For further information about this securities law blog post, please contact Todd Feinstein, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, or [email protected] or visit

This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Reverse Merger transactions,Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or [email protected] Please note that the prior results discussed herein do not guarantee similar outcomes.