[Q] Can several affiliates owned by one person be restructured to go under one holding company to qualify for EB-5 case?
[Q] Imagine a situation where a current E-2 investor has 3 companies in which he has invested approximately $400K in each (total $1.2 million investment). He is the 100% owner of all 3 companies. One of the companies owns the job-creating business, let's say a car wash, which already created 10 full-time positions. The other 2 companies own real estate leased to the business. The investments were made several years ago.
To try to qualify for EB-5 case, can the investor form a holding company in which he would be 100% owner, and then transfer all of his shares in each of the 3 separate companies to the holding company? In this way, there would be one holding company and the 3 corporations would be wholly-owned subsidiaries of the holding company. Would this structure comply with the definition of commercial enterprise at 8 CFR 204.6 and, as a result, allow all investments in the 3 separate companies to be pooled for purposes of showing $1m investment?
This is an interesting question and happens more often that one thinks.
Now, EB-5 law says one holding companies which wholly-owned subsidiaries can be treated as a New Commercial Enterprise for EB-5 purpose. Also, the investment and jobs created in the past can qualify for EB-5 case, as long as the jobs are maintained for a new CPR period after I-526 approval. However, we would not take the case if we were the processing attorney for the following reasons:
1. CSC could argue that not all $1 MM (assuming this is a regular, non-TEA EB-5 case) went towards the job creation. In the instant case, only $400,000 was applied towards the job-creation, and that the remaining two companies (now wholly-owned subsidiaries) did nothing.
2. CSC could argue that since you materially change the original structure, you now have to make an entirely new investment.
All of the above arguments that could be made by CSC might not be practical or fair, but they could and will likely make those arguments and deny your EB-5 case. No, we would not take the above case, given this possibility.