What is an Escrow Agreement and How Can it be Used for an E-2 Visa? What if my E-2 Visa does not get Approved when I have Bought a Business?

An E-2 visa is an investor visa that permits a company or individual to buy or start a business in the United States. The investment amount can be low depending on the type of business and there is no requirement to hire workers right away. The visa is available to nationals from certain treaty countries and the E-2 visa can be renewed indefinitely. To find out more about the E-2 visa and the E-2 visa requirements click here.

What does “At-risk” Mean?
One of the E-2 visa requirements is that the funds must be committed and at-risk. At-risk means that all of the assets invested must be personal assets subject to risk of loss and you actually have something to lose. Normally this means that the money has been spent and you cannot get it back. An at-risk amount can also include an irrevocable commitment, such as a lease, that runs over a term if you are obligated to continue to make lease payments over the term.

Uncommitted funds in a bank account are not considered at-risk as the investor can simply remove these funds from the bank account when he/she wishes. A loan is still considered at-risk if you have an obligation to pay but are considered “more” at-risk if the loan is secured by personal assets. Funds are not considered at-risk if the applicant invests using a loan that is secured against the business assets as the investor will not be personally liable if he/she defaults.

Is At-Risk Amount the Same as the Investment Amount?
No. At-risk and investment amount are two different but related E-2 concepts. The at-risk amount represents an investment in the business already made and could also be a future commitment (eg. a lease) that you are obligated to pay in the future. For an E-2 visa the investment amount can include a small amount of working capital but the working capital is not considered at-risk. As such, if your total investment amount were to be $200,000 where you spent $80,000 on rent, legal fees, equipment, inventory and other goods, the $80,000 would be the at-risk amount where the full $200,000 would be considered your investment amount where $120,000 would represent uncommitted (not at-risk) working capital.

What is an Escrow Agreement? How can an Escrow Agreement Assist with an E-2 Visa?
Many of our clients have asked us what will happen to their investment if their E-2 visa is not approved and wonder how the Government could expect them to spend money (eg. purchase a business and transfer funds) before the E-2 visa is actually approved. This is definitely one of the scarier aspects of the E-2 visa but the fact is that expenditures have to be made and funds have to be transferred before the E-2 visa application is submitted. An applicant faces a risk that the E-2 visa will not be approved but it is clear that the E-2 visa has been designed for those at the final stages of business operation rather than for those who are “thinking” about starting a business. Click here to find out more about the Real and Operating E-2 requirement.

If an investor is purchasing a business or an asset, there is an ability to safeguard funds though and this can be done through the use of an Escrow arrangement. As an example, if an investor wants to buy a business for $200,000 and is worried about that the visa may not be approved, they can have a lawyer draft an escrow agreement and include terms in the purchase sale agreement that specify that the funds would be transferred to an escrow agent instead of the vendor. Once the E-2 visa is approved, the funds would be transferred from the escrow agent to the vendor.

The key to making sure that the funds are still considered “at-risk” is that the escrow and purchase and sale agreement include the sole contingency that the sale is contingent on the approval of the E-2 visa. As such, if the E-2 visa is approved, the funds would be transferred directly from the escrow agent to the vendor. If the visa is denied, the money would be returned to the investor. The agreements cannot include ANY other contingencies other than the E-2 visa approval and you should have a lawyer review the agreements carefully before signing. The use of an escrow agreement removes some of the risk that the investor will forfeit funds if the E-2 visa is not approved and ensures that the investor does not have to chase the vendor for their money if they agree to void the sale in the event of an E-2 denial.

Similarly, lease agreements can include similar provisions that indicate that if the E-2 visa is not approved, the investor would not be liable under the terms of the lease agreement.


Ian E. Scott is a Harvard Law School Graduate, lawyer and author of Law School Lowdown: Secrets of Success from the Application Process to Landing Your First Job. Mr. Scott worked as a corporate litigator in the law firm Cleary Gottlieb and currently runs his own law firm Scott Legal, P.C. specializing in Immigration Law & New Business set-up.

For more practical or legal advice contact Scott Legal, P.C.. We offer services in a number of business areas including, Immigration, New Business set up, Contract review and development and entrepreneurial support. Call 212-223-2964 or email info@legalservicesincorporated.com for a consultation.


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