Money and structure
Exit strategy
Also called exit, repayment, capital return.
Exit strategy is the industry name for how and when invested capital is meant to return to the investor, whether through repayment of the project loan, a sale, a refinancing or a buyback. USCIS does not define the term, and immigration law limits it: capital the investor has a contractual right to get back does not count as capital at all.
What it decides
The immigration clock and the money clock are different, and offerings blur them. For a petition filed on or after 15 March 2022, immigration asks that the capital be expected to remain invested for not less than two years, 8 U.S.C. 1153(b)(5)(A)(i). USCIS reads that period as beginning on the date the qualifying amount is contributed to the new commercial enterprise and made available to the job creating entity, and it no longer runs through conditional residence, guidance of 11 October 2023. The older rule, capital continuously maintained over the two years of conditional residence, 8 CFR 216.6(a)(4)(iii), still governs petitions filed before that date. Either way nothing entitles an investor to repayment on any date, because an agreement giving the investor a contractual right to repayment strips the money of its character as capital, 8 U.S.C. 1153(b)(5)(D)(ii)(III)(dd). A mandatory redemption, or a put held by the investor, disqualifies it even where payment depends on the project having cash. A buyback exercisable solely at the discretion of the enterprise is allowed, 8 U.S.C. 1153(b)(5)(D)(ii)(IV), so the direction of the option decides the question. Matter of Izummi, 22 I&N Dec. 169 (Assoc. Comm. 1998), remains the precedent on exit terms that show a preconceived intent to leave the investment. If the job creating entity repays before the period closes, the enterprise may redeploy the money to keep it at risk, and 8 U.S.C. 1153(b)(5)(F)(v) sets the conditions, among them that redeployed capital not sit in passive investments such as stocks or bonds. That provision directs DHS to write regulations, which it has not done, so USCIS applies the conditions through the Policy Manual. Once the two years are served and the jobs exist, immigration stops requiring the money to stay put, and what delays the real return is the project, not the statute.
Where this is explained properly
Pages here that go into exit strategy rather than mentioning it.
Related terms
- Operating agreementAn operating agreement is the contract that governs a limited liability company serving as the EB-5 new commercial enterprise, setting voting, management, distributions, transfers and redemption. A limited partnership uses a limited partnership agreement for the same purpose. Neither is defined by the EB-5 statute or regulations, but the immigration rules test what they say.
- Subscription agreementA subscription agreement is the contract by which an investor buys an interest in the new commercial enterprise, carrying the price, the investor's representations, the closing conditions and, where the offering uses one, the terms on which money leaves escrow.
- Ten full-time jobsTen full-time jobs for qualifying employees is the EB-5 job creation requirement: each investor's capital must produce its own ten, which is the number an offering's economic report has to show for every investor it takes in.
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