manager is affiliated with the owner of the redeployment
project or the general partner/manager seeks to retain the
same level of compensation from the redeployment project
as it received from the investment in the original project. Many
EB-5 investors, on the other hand, did not anticipate that their
EB-5 investment would need to be redeployed at all, or at least
for such a long period of time after their original investment is
repaid to the NCE. This has especially impacted EB-5 investors
from China who invested after 2014, since the priority date for
those investors is now May 15, 2015 according to the U.S. Visa
Bulletin for March 2020, which means these investors may
have to wait years until their priority
dates are reached.
WHAT ARE EB-5
INVESTORS
CONCERNED ABOUT?
• Receiving a ver y low rate of
return on their EB-5 investment
for an extended period of time,
which they did not anticipate
at the time they made their
investment.
Use an independent review process and an independent
investment adviser to select the reinvestment
An independent review of each proposed reinvestment
can help mitigate the conflicts of interest inherent in
the reinvestment decision. In addition, the suspicions of
EB-5 investors can be addressed by demonstrating the
fairness of the redeployment selection process using an
independent third party to evaluate the merits of each
reinvestment. The process may not be perfect, but a good
faith effort to consider the concerns of EB-5 investors can
assist in maintaining their trust in the general partner/
manager of the NCE and agents.
"An independent
review of each proposed
reinvestment can help
mitigate the conflicts of
interest inherent in the
reinvestment decision."
• Additional risks of losing their
EB-5 investment incurred as a result of being required
to have their investment reinvested in one or more new
projects over which they have no control.
• Suspicion that their agents, the general partner/manager
of their NCE and the developers of their original EB-5
investment have conflicts of interest and therefore are
not protecting the EB-5 investors’ interests in selecting
each new investment for redeployment.
WHAT KIND OF LITIGATION
IS INVOLVED?
• Failure to obtain appropriate EB-5 investor consent
under the NCE’s governing documents to approve a
redeployment investment.
• Failure to provide adequate disclosure with respect to
the redeployment opportunity itself when seeking EB-5
investor consent.
• Breach of fiduciary duty by the general partner/manager
of the NCE in selecting one or more reinvestments due
to conflicts of interest, resulting in investments that do
not offer the best terms or the best protection for the
EB-5 investors’ capital.
• Lack of disclosure regarding the compensation received
by the general partner/manager of the NCE and/or the
agents in connection with the reinvestment.
WHAT STEPS SHOULD BE TAKEN WHEN
REDEPLOYMENT IS NECESSARY?
In light of these potential claims against the general
partner/manager of the NCE and agents, it is recommended
that the following factors be considered and undertaken in
connection with every redeployment made by an NCE:
If a project by the same developer
as the original project is available,
consider the benefits of that
investment to the EB-5 investors
Many EB-5 investors selected their
EB-5 investment on the basis of their
confidence in the developer of the
original EB-5 investment project.
These EB-5 investors may therefore
prefer that their capital be reinvested
in a project with the same developer,
because of their familiarity with the
developer.
Consider and compare other reinvestment opportunities
The general partner/manager of an NCE should consider
whether there are other reinvestment opportunities that are
reasonably available that would better protect the interests
of the EB-5 investors.
Review the NCE’s governing documents and follow the
procedures required by those documents for reinvestment
If the NCE’s partnership agreement or operating agreement
does not address reinvestment at all, an amendment to the
agreement may be necessary to authorize the reinvestment.
If reinvestment is contemplated in the agreement, the
selection and approval requirements for the reinvestment
must be followed in accordance with the agreement.
Provide written disclosure to EB-5 investors prior to
reinvestment of the material terms of the reinvestment
Whether or not an amendment is required to approve a
reinvestment, the general partner/manager of the NCE
should provide written notice to EB-5 investors prior to
every reinvestment, informing them of the repayment of
the original investment and the details of the proposed
reinvestment.
Offer EB-5 investors an opportunity to withdraw prior to
redeployment
Although usually not required in the NCE’s partnership
ag re e me n t or ope rating ag re e me n t , in view of the
unanticipated delays for EB-5 investors now subject
retrogression, EB-5 investors should be offered a right to
withdraw their capital if they have determined to withdraw
from the EB-5 visa process. This does not mean that every
EB-5 investor should have a right to withdraw whenever
they choose, but only when the NCE receives repayment
of its original investment, before redeploying into another
investment, the NCE should offer those EB-5 investors
EB5INVESTORS.COM
13