EB5 Investors Magazine "Top 25 issue" Volume 9 Issue 1 - Page 18

redeployment presents peril . If redeployment is not effected in a timely manner , the immigration benefit is put at risk ; if it is effected with self-interest , or is sloppily or not properly treated , it opens the door to claims of fraud , if not diversion . All of this would likely lead to securities law liability .
There are many practical steps that must be undertaken to process a redeployment strategy . The first stop takes us to the state of the applicable offering and loan documents . Before 2015 , most offering documents did not likely contemplate redeployment because that problem had not yet become a concern . Even before , it had become common to include two-year extensions of the normal five-year loan term because it was understood that processing delays could impact the deals . In any event , we must analyze how the offering documents dealt with redeployment--if at all . There are four potential disclosure scenarios , which go from worse to probably best . These are :
Scenario A : silence , nothing at all on redeployment ;
Scenario B : addressed redeployment but relied on investor consent ;
Scenario C : NCE fund managers were granted the power to redeploy but no specific targets or parameters were identified ; and
Scenario D : NCE fund managers were empowered to redeploy and provided for a plan on redeployment , including identifying targeted projects or at least committed to only redeploy into projects that met certain loan and underwriting parameters likely similar in risk profile to the original investment .
Scenario D may present the best scenario for the NCE principals because it clearly provides the principals with the apparent power and authority to redeploy and invokes investor “ buy-in ” as to the redeployment parameters . In this scenario it could be argued that no investor consent is needed and that quite possibly only notice of the redeployment is required or desirable and disclosures akin to an offering are not necessary .
As you examine the three other scenarios noted above , one should conclude that investor consent and offering styled disclosures regarding the proposed redeployment are necessary and unavoidable . And if you must obtain investor consent , then the entire process could be imperiled because you might not be able to obtain the needed investor consent that may be required by the applicable operative agreement . This could result in the worst outcome possible : investor denials . Interestingly , too , if the Fund structure was a limited partnership arrangement , the limited partners that are involved in the consent issue could find that by ( i ) acting they eroded the limited partner liability protections they once enjoyed and ( ii ) failing to agree , they could subject themselves to liability from other investors as a result of their failure to reach consensus and blowing the redeployment opportunity .
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18 EB5 INVESTORS MAGAZINE