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The E-2 Visa Category: Treaty Investors

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    2008-10-1321:28:15 #145781
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    The E-2 visa category is reserved for Treaty Investors: nationals of a treaty country who intend to temporarily come to the U.S. with the purpose of playing an essential role in the operations of an enterprise in which he or she has or is in the process of making a substantial active investment and in which will result in the creation of jobs.

    Notice that in the E-2 category, the business does not yet have to be established. In the E-1 category, the business must already be engaged in trade or be able to provide contracts for future trade. Consequently, E-2 stresses investment while E-1 stresses actual trade.

    What is considered an essential role in the enterprise?

    An essential role can be held by either a principal investor or a supervisory/managerial employee. In either case, the applicant must be essential to the development and direction of the enterprise.

    What is considered an active investment?

    An investment is considered active if there is an irrevocable commitment of funds, and if it is a real, operating enterprise. The investment must entail some risk to the investor in commercial sense. At a minimum, there must be a long-term lease of an office in the U.S. This strictly rules out idle investments and uncommitted funds in a bank.

    • Ms. Lee buys a plot of land in Albuquerque, New Mexico, in order to build a hotel. She applies for and receives a commercial building permit from the city, and hires a building company to begin contracted work. A prospectus is filed with state officials and includes company’s intention to run the property itself rather than contracting with a management company. This investment is considered active. Ms. Lee is committed as she has already bought the land and construction has begun. Further, she has stated her intent to play an essential role in the development of the hotel.
    • Mr. Ho buys an already existing chain of pizza restaurants in Chicago from the previous owner. He decides to keep on the current employees but plans to make a few changes in marketing and production. This investment is also active, considering the fact that Mr. Ho needs to continue running the chain.
    • Ms. Chen buys a mall in Boston. She hires a management company to take care of maintenance, leasing spaces, and day to day operations. This is not considered an active investment as Ms. Chen does not have an essential role in the enterprise and is instead, only waiting for an appreciation in the mall’s value.

    It is possible to utilize various legal techniques, such as holding funds in escrow account or setting a condition for the contract effectuation, to establish the necessary commitment of funds while reserving a rescue exit in case of visa denial. For example:

    • David, a Taiwanese, intended to purchase a franchised hotel in Houston. He did not want to risk his investment fund before seeing his E2 visa approved. However, without seeing the committed investment, the visa officer is impossible to approve his E-2 visa application. To solve this “Catch-22” dilemma, David signed an “intent to purchase” agreement with the franchiser. In the agreement, he set one, and only one contingency: the execution of this agreement is contingent upon receipt of the E-2 visa. David placed all of the investment funds into an escrow account, with the only release condition being receipt of the visa. This E-2 visa was approved. Now David owns 8 franchised hotels in the United States. Please note that: It is not enough to merely enter into a purchase agreement that gives the seller the right to sue if you do not buy the business.

    What is considered substantial investment?

    A substantial investment must be enough to ensure successful operation of the business. The investment must be a significant proportion of the total existing or start-up business value. This is decided based on two factors: the amount of the investment and the type of financial transactions making up the investment.

    • Amount of investment: Whether the investment amount involved can be defined as being “substantial” depends on the nature of the enterprise. There is no minimum amount set or specific threshold defined. Manufacturing enterprises usually require more substantial capital for successful operation than do retail stores or consulting firms. Generally, the lower cash amount involved the less likely one is to qualify as a Treaty Investor. In practice, many of our cases involving capital investment around $200,000 have been approved. In our opinion, any investment below $100,000 would need a very strong case to support it. Investment below $40,000 will be extremely difficult to get the case approved.
    • Type of financial transaction making up the investment: Only transactions that irrevocably commit the alien are counted as substantial investments.
    • Example: Canadian citizen Mr. Gee contributed $800,000 and his Chinese partners contributed $300,000 towards furniture importing business in Illinois. With this $1.1 million investment, the business has leased a large warehouse to store inventory merchandise, valued at $1 million, which was purchased and imported from China. The business has also hired five employees and plans to recruit more in the immediate future. This investment is considered substantial due to Mr. Gee’s irrevocable commitment. He is personally at risk if the business fails, and thus satisfies the requirements.

    Creation of Jobs

    The investment cannot be marginal and must generate significantly more income than what is necessary to support the investor and family. Ideally, the investment should be big enough to create job opportunities for U.S. workers.

    Our Services

    If an E-2 visa sounds right for you, Z&A can help assess your situation and put forth a winning application. We invite you to email Attorney Daqin Zhang at @hooyou.com">dzhang@hooyou.com for a free consultation.