EB5 Investors Magazine "Top 25 issue" Volume 9 Issue 1 - Page 23

" The EB-5 Issuer should consider creating more than one class of EB-5 investors ."
raised direct EB-5 investors at $ 500,000 a subscription . Post enactment of the Act , it is now raising EB-5 capital at $ 800,000 an investor . One can imagine just how complicated the offering documents and related operating agreement gets with so many different considerations .
3 . RECOGNITION OF FEES : The amendment , to the offering documents , must include a supplement to the Subscription Agreement that requires the subscriber to acknowledge all affiliated party compensation , including the payment of administrative fees and allocable interest / preferred return payments payable on account of the loan or equity funding .
4 . NEW AMOUNT : The Operating Agreement would also need to be amended to provide for a new class of EB-5 investors who will invest either $ 800,000 or $ 1,050,000 as compared to the prior subscription amounts that would have been $ 500,000 and / or $ 900,000 . appropriately distributed and / or shifted between pre-Act and post-Act investors , regional centers , EB-5 issuers and if applicable , fund administrators . In connection with that , below is a list of considerations that should be taken into account when working on offerings that are being revamped following passage of the Act .
FACTORS TO CONSIDER WHEN REVAMPING EB-5 OFFERING
1 . UPDATING OFFERING : The EB-5 Issuer should consider amending and restating the pre-existing Offering documents to restate all previously disclosed information with detailed and appropriate updates .
2 . MULTIPLE CLASSES : The EB-5 Issuer should consider creating more than one class of EB-5 investors . The structure chart in this article details the complexity associated with an offering that has gone through multiple cycles of investor classes . Prior to Nov . 21 , 2019 , it raised EB-5 capital from investors at $ 500,000 a subscription . Between Nov . 21 , 2019 and June 21 , 2021 , it raised EB-5 capital from investors at $ 900,000 a subscription as a result of the passage of the DHS regulations (“ DHS Regulations ”). Between June 30 , 2021 and March 15 , 2022 , it spun off a separate new commercial enterprise from the job creating entity , and
5 . DISCLOSURE : The amendment and restatement of the Offering documents would incorporate the relevant provisions of the Act and the published rules and regulations . The disclosures would also need to explain the existing backdrop of interpretation and relevant litigation .
6 . ESCROW : A nuanced and complicated component would be dealing with existing escrow agreements and third-party administrative services . If an EB-5 Issuer was working on a new offering , it would be much easier compared to dealing with prior investors whose capital may either fully or partially still be held in escrow . Dealing with pertinent release of such EB-5 capital , from escrow , is further complicated by the status of the regional center program . As such , disclosures and relevant discussions must be held with the pre-Act ’ s existing investors with respect to the release of such EB-5 capital , from escrow , if applicable .
7 . TEA IMPACT : The post-Act Offering would need to carefully deal with targeted employment area (“ TEA ”) designations . Previously , designation for TEAs were held with state and / or local bodies until passage of the DHS Regulations when the authority for such designation shifted to DHS . Those DHS Regulations were subsequently vacated by a court ruling on June 21 , 2021 . With the passage of the Act , the TEA designations have
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