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Preeti Sinha

Do I have to use escrow when taking in EB-5 investors capital?

Answers

Philip Cohen
January 27, 2016 09:53 AM  Philip Cohen

Escrow is not a requirement under the EB-5 program, but it has become the expectation among investors and agents alike in any situation where the money is not released to the project immediately upon the investor's subscribing to the deal and releasing their capital. As services go, it is not expensive at all and well worth the return in terms of contributing to investor confidence.

Raymond Lahoud
February 28, 2016 03:30 PM  Raymond Lahoud

Not necessary; although, in the interest of investor security, it is best to escrow any investor funds.

Ismael Fernandez
March 01, 2016 11:16 AM  Ismael Fernandez

Not an EB-5 requirement under the law. It is however the most preferred method to hold the money before the I-526 application takes place in Regional Center projects. If you have an escrow however, make sure the offering documents, including the PPM, highlight how the money will flow from escrow into the project as deviations from here may have some potential liabilities for the general partners and developers.

A. Olusanjo Omoniyi
July 26, 2016 10:43 PM  A. Olusanjo Omoniyi

It highly advisable that it should be particularly prior to filing of I-526, even though it is not legally required. However, most investors and their agents typically insist their funds must be escrowed.

Gerald  Cipolla
February 08, 2017 10:51 AM  Gerald Cipolla

Escrow is not required, however, generally recommended. Upon approval of the I-526 petition the escrowed funds will be released into the EB-5 project. In the event the I-526 petition is not approved, the funds would be returned from the escrow account to the investor, provided the escrow agreement is set up properly. It is important to note that under the escrow agreement the funds still need to be irrevocably committed. Reviewing which bank will serve as the escrow agent should be reviewed. It is essential to trace the funds from the investor account to the escrow account and any intermediary banks to prove the funds are the investor's funds.

Marko Issever
September 26, 2017 05:26 PM  Marko Issever

No, but as a best practice it has become the expectation of both the investors and broker dealers that there is an independent set of eyes making sure that disbursements are taking place in accordance with the PPM.

Mark A.M. Catam
February 27, 2018 03:44 PM  Mark A.M. Catam

Not at all. The investment can go directly into the NCE. In fact, this is common in the direct/standalone EB-5 context. However, escrow provides the investor an added layer of protection. So it is advisable.

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