[Q] What is the establishment provision that has been deleted that helped revive RC Program in 2002?
[Q] I understand that there was in the past a requirement that an EB-5 investor "establish" the New Commercial Enterprise, and that this requirement was done away with around 2002 that helped "revive" the EB-5 Program in general. Can you explain what this is all about?
Let's examine how this "establishment" requirement used to adversely affect both the regular, direct, individual EB-5 project and Regional Center EB-5 project.
In context of regular EB-5 project, the "establishment" clause meant that the investor could not just purchase an existing business even though the business was "new" -- that is, it was created after November 1990. This meant if the investor decided to acquire an existing business, he had to "materially" alter the business, so he could argue that he "established" a new business (or new commercial enterprise). This was the kind of requirement that prohibited bona-fide EB-5 projects to take place, because there is really no reason why you should discourage foreign EB-5 investors to invest in existing U.S. businesses.
In context of Regional Center EB-5 project, since the new commercial enterprise was usually a limited partnership or a like-kind legal entity into which the pooled moneys of individual EB-5 investors were invested, the requirement that an individual EB-5 investor(s) "establish" this Limited Partnership meant that such individual investors had to be the very individuals who initially set up and put in their investment at the beginning. This was totally contrary to the real-world commercial requirements, because in the real world, an incorporator establishes a corporation or limited partnerships and then goes about attracting investments from individual investors. Anyway, this is just one amendment which had to take place to make the Regional Center EB-5 Program work.
Therefore, this was a "hardware" amendments which were made to at least make the RC Program feasible, and some "software" improvements or changes were made, but more are supposedly underway. Of course, some people are concerned that these changes may not really be improvements but rather impairments. We just have to wait and see, but at least now, USCIS is more sensitive to the needs of EB-5 Program, but is vigilantly guarding against any RC Programs that are not bona-fide.