EB-5 Direct Investment Compliance: Drafting Operating and Shareholder Agreements

For EB-5 direct investment cases, corporate governance documents, most commonly LLC Operating Agreements or Corporate Shareholder Agreements, take on a role far greater than mere corporate formalities. These documents function as immigration compliance instruments that USCIS will scrutinize to confirm that the investor’s capital is at risk, sustained throughout the EB-5 period, and deployed in accordance with the EB-5 business plan.

Ensuring strict EB-5 Direct Investment Compliance is critical, as an incorrect sentence in the governing documents could result in the denial of an EB-5 petition. This is true even if the investor has made the required investment and created the required jobs. This document outlines key provisions that should be reflected in operating or shareholder agreements for EB-5 direct investments.

Key Provisions for EB-5 Direct Investment Compliance

The foundational requirement for any successful petition is that the investment must remain “at risk.” This means there can be no guarantees and no redemption rights built into the corporate structure.

Capital Must Remain “At Risk” with No Guarantees or Redemption Rights

EB-5 law strictly prohibits any guaranteed return of capital or guaranteed yield. Corporate documents may not include provisions stating that the investor will receive a specific return or guaranteed profit. Instead, the documents must clearly state that the investor is not entitled to any return on investment (interest, dividends, or otherwise).

Any potential return must be subject to business risk and market conditions. The investor must not have the ability to redeem ownership interests, compel repayment, force liquidation, or withdraw capital until EB-5 requirements are fully satisfied, including approval of the I-829 petition. Actual wording will depend on the facts and circumstances, and sample language is provided below:

The sole and only member, [Investor Name], shall not be entitled to receive any interest on his/her initial or subsequent capital contributions to the Company. The Member shall have no right to demand or receive the return of any portion of his/her capital contribution until the EB-5 requirements have been satisfied. Any return of capital, if it occurs, shall take place only in strict compliance with EB-5 requirements through approval of the I-829 petition or the lawful dissolution and winding up of the Company in accordance with this Agreement and applicable law, and only after all debts, liabilities, and obligations of the Company have been satisfied.

Nothing in this Section shall be construed to guarantee the return of the Member’s investment, and any return shall remain subject to the risks of the business and the requirements of the EB-5 Immigrant Investor Program.

Strict Use of Funds in Accordance with the EB-5 Business Plan

USCIS expects EB-5 funds to be deployed consistently with what was represented in the business plan. Company funds may only be spent in accordance with EB-5 regulations and may not be used for personal withdrawals, unrelated business activities, or impermissible loans/activities.

This issue is particularly sensitive where there is a single investor with broad control. Accordingly, corporate documents should include explicit language strictly prohibiting any use of EB-5 investment funds that does not comply with EB-5 program requirements. Sample language is provided below:

All Members acknowledge that Company funds exist solely to implement the EB-5 business plan, including lease payments, construction costs, payroll, equipment purchases, and working capital. Members agree that EB-5 invested capital in the Company’s bank account shall be spent strictly in accordance with the Business Plan on qualified EB-5 expenditures only. > No individual Member (regardless of ownership percentage) or group of Members may expend EB-5 capital from the Company bank account for any purpose not authorized by the Business Plan or EB-5 regulations. All Members (including any majority owner) acknowledge that Company funds are limited to expenditures outlined in the Business Plan or EB-5 regulations (including lease obligations, employees, construction, and similar expenses), and that any other expenditures or withdrawals are strictly prohibited. Further, [Non–EB-5 Investor, if applicable] must approve all expenditures and/or withdrawals from the Company bank account.

Managerial Limits and EB-5 Direct Investment Compliance

Where the EB-5 investor also serves as Manager, managerial authority must be expressly limited by EB-5 compliance requirements. The Manager may not authorize unauthorized expenditures, engage in self-dealing, or distribute capital to herself in violation of EB-5 rules.

In single-investor cases, the investor may retain full voting and management authority subject to EB-5 compliance limitations. Where possible, allocating oversight or approval authority to another individual can strengthen EB-5 compliance arguments. In multi-member structures, voting rights should be proportional to ownership, with reserved matters subject to heightened approval standards tied to EB-5 compliance.

Other Considerations for Corporate Governance

There are several additional considerations that may be appropriate for inclusion in EB-5 corporate governance documents:

• Entity Type: The entity type does not matter. That is, an LLC, Corporation or Partnership could all work for an EB-5 case.
• Approval Authority: The governance document (operating agreement, S/H agreement, etc.) may designate a specific individual, preferably not the EB-5 investor, to approve expenditures.
• Third-Party Payments: All expenditures should be made to unrelated third parties and must serve legitimate business purposes tied to job creation. Payments should not be made to relatives or related entities.
• Compliance Standards: Corporate documents may reference compliance with EB-5 requirements and applicable law as a governing standard for company actions.
• Reasonable Compensation: Until EB-5 requirements are met, no distributions constituting a return of capital or disguised repayment may be made. Compensation (e.g. Salary, dividend, etc.) to EB-5 investor (or family members) must be reasonable, market-based, and paid solely for bona fide services from revenue generated by the business. Compensation to the investor (or family members) cannot come from the EB-5 investment amount.
• Dissolution: Dissolution may occur only in compliance with state law and EB-5 requirements. Any return of capital must remain subordinate to creditors, subject to business risk, and not guaranteed.

Strategic Foundations: Take the Next Step Toward Your U.S. Residency

For EB-5 direct investments, operating and shareholder agreements function as core immigration evidence demonstrating at-risk capital, sustained investment, and credible job creation. Because careful drafting is essential to EB-5 success, navigating these complexities requires a tailored strategy that aligns with your professional background and financial goals. Whether you are ready to move forward or are still weighing your options, our firm is here to provide the expert guidance you need to ensure your corporate governance meets every USCIS requirement.

You can schedule a consultation with our legal team to discuss your eligibility and strategy, sign up for our upcoming free immigration webinars to learn more about the latest policy updates, or download our free EB-5 immigration guide for an in-depth look at the program. Additionally, we invite you to browse our extensive library of EB-5 articles.