It is common practice for EB-5 project managers to utilize an escrow arrangement to safeguard investors funds prior to the approval of the investors I-526 petition. The I-526 petition is the application filed by the EB-5 specialist on behalf of the EB-5 investor for their U.S. green card and residency. It is thus imperative that the potential EB-5 investor understands the process behind placing their funds in an escrow account.
An escrow agreement is a contractual agreement formed between the EB-5 project manager and the EB-5 investor allowing for a third party escrow agent to handle the EB-5 project escrow account. The escrow account ensures that the EB-5 investor funds will be available for use when the I-526 petition is approved or for refund to the EB-5 investor if the petition is denied. This creates an additional level of security for both the investor and the EB-5 project manager.
Once the EB-5 investor has chosen a suitable project to invest in they would sign an escrow agreement and proceed to deposit the required investment to the escrow account relating to the project. Prior to the filing of the I-526 petition with the United States Citizenship and Immigration Services (“USCIS”) the EB-5 project manager will supply the investor with conditions on when the money will be released from escrow, these conditions will differ with each individual project:
- The escrow agreement conditions may state that the release of the funds is based upon filing an I-526 petition. This means that once the EB-5 investor receives the confirmation of their I-526 petition filing their EB-5 specialist will provide the confirmation to the escrow agent. The agent will then release the funds to the designated project company account.
- The escrow agreement conditions may differ from above and state that no funds will be released until I-526 petition approval. This would then mean that the funds will remain in escrow until approval of the petition. If the I-526 petition is denied the escrow agent will refund the amount to the EB-5 investor.
- Finally, the escrow agreement conditions may state that the funds will be released in stages, for example, half when the I-526 petition is filed and half when the I-526 petition is approved then the escrow agent will release the funds as per the agreement.
The above conditions are no doubt different and may have different implications for each EB-5 investor and must be carefully reviewed before signing.
Escrow accounts play an important role in the movement of funds and facilitation of the release of funds to a project. Typically, they hold the entire EB-5 investment pool and capital contributions. Evidently serving to benefit both the EB-5 project manager and the EB-investors. It is thus very important that the EB-5 investor not only knows of the process regarding the formation of escrow accounts but thoroughly understands the conditions in which their individual agreement stipulates for the release of funds.
The EB-5 investor must work with experienced professionals that will assist with connecting them with the right EB-5 projects or regional centers that will make their journey to obtaining a U.S. green card and residency as smooth as possible.
The American Legal Center is a team of U.S. licensed lawyers that have been assisting families from the GCC and other emerging markets obtain their U.S. green card and residency for over 10 years. We have worked with reputable regional centers that have ensured the safe transfer, allocation and distribution of EB-5 capital investments to the correct EB-5 project. Contact us today for your free consultation.