Use of Escrow in applying for E-2, Treaty Investor's Visa
Using an escrow is one way of demonstrating the investor’s required commitment in the application for an E-2, or Treaty Investor Visa, while reducing the risk of being stranded with an investment if the application is eventually unsuccessful.
An important question
At the time the application for the E-2, Treaty Traders Visa is presented, one must demonstrate that the investment has already been made, or is “actively in the process” of being made. What does it mean to be “actively in the process” of making an investment?
Let’s take a step back. There are many people who would like to invest in the U.S., whether or not they live there. These people would like to have the E-2 visa, but will go ahead with their plans even if the visa is denied.
But there are also many people who do not wish to invest if they are not in the U.S. with their investment. It is entirely reasonable for them to try to limit their financial commitment until the visa is approved. Therefore, the meaning of the requirement that they be “actively in the process, of investing” becomes very important.
Assessing the risk of visa denial
Let’s take an even further step back and assess the risk of being denied a visa.
Remember that the primary reasons for U.S. immigration denying a visa application are, in general, the filing of an incomplete or wrong application, and the inability to authenticate required documents. These reasons may point to applicants who are preparing their own E-2 visa applications. Because the application process requires the preparation of a detailed business plans, financial projections, and many other elements, it rewards professional expertise, and punishes amateurs.
In regard to the E-2 visa specifically, the most common reason for rejection is an inadequacy, either in the dollar amount of the proposed investment, or in the prospects of the business plan offered in the application. Unfortunately, there are attorneys whose marketing seems to contribute to the notion that an E-2 visa may be approved with an investment under $100,000, and in a few cases, as low as $25,000.
In summary, with professional guidance, and with a focus on your business as a serious and going concern, your chances of receiving the E-2 visa are good.
The use of escrow
But with all this said, the investor who does not wish to complete the investment if the visa is eventually denied, can minimize financial risk in one of two ways:
–By demonstrating that it has entered into binding legal commitments, which could include the establishment of bank accounts, the hiring of personnel, the signing of a lease contract, the procurement of equipment, materials and inventory. These contracts may contain provisions conditioning further commitments on obtaining the visa.
–The use of an escrow.
An escrow is a device used extensively in the United States, although primarily in the purchase of real property (homes, land, buildings). It is a means of making purchases take place more efficiently and with less risk.
The buyer and seller choose a third party to act as the escrow agent. In American real estate practice, that agent works for the same insurance company that will issue the policy of title insurance to the buyer (also common in the U.S.). The buyer places money for the purchase with the escrow agent, who will hold and distribute that money in accordance with the buyer’s and seller’s agreement.
In the case of the E-2 visa, that process is adapted somewhat. The applicant enters into an agreement with the seller of a business (or the assets constituting the major part of such business), agreeing that the purchase price be placed in the custody of the escrow agent or company. In general terms, the parties agree that the money will be given to the seller in the event the E-2 visa is ultimately approved, but will be returned to the buyer in the event it is not. In this way, the applicant demonstrates its commitment to the investment, while limiting its overall exposure.
There are several concerns using the escrow process in this way. First, the seller of the business may not wish to make the sale depend on an application that may still be several months from being approved, and which is subject to process over which it has no control. Indeed, the willingness of a seller to engage in this kind of escrow operation may signal desperation, or something worse. Second, as stated earlier, the escrow process in the United States takes place as part of standard real estate closings, in which the incentive of the escrow agent merges with its function as the issuer of the title insurance policy. The use of escrow within the E-2 visa process may require an escrow agent willing to step outside this norm. In some immigration practices in the U.S., lawyers representing either the buyer or seller have offered to act as escrow agents. It is not possible to do this while satisfying the ethical requirements of the profession.
Nevertheless, the escrow has been officially accepted by U.S. immigration authorities as a means of demonstrating that the applicant is in the “active process of investing” at the time the application is submitted. In appropriate circumstances, we can assist our clients in setting up an escrow arrangement which will satisfy the goals of both parties.
The SIGNET Law Firm
We are dedicated to helping foreign business invest and operate in the United States successfully. As part of our services, we specialize in helping our clients procure the E-1 and E-2 visas, which enable them to live in the U.S. while they manage and operate their businesses.
Thank you.
We hope you have found this information useful. If you would like to speak with us, we are available.