What does “restructure and reorganize” mean?

[Post updated 4/18/2017] “The purchase of an existing business and simultaneous or subsequent restructuring or reorganization such that a new commercial enterprise results” is one of the ways to satisfy the EB-5 requirement to invest in a “new” commercial enterprise. (See my post on Options for investing in an existing business to see the whole range of options. The “restructuring/reorganization”option is relevant when the purchased business was originally established before November 29, 1990.)

The USCIS Policy Manual Volume 6 Part G Chapter 2 (C) (1) explains,

A new commercial enterprise also includes a commercial enterprise established on or before November 29, 1990, if the enterprise will be restructured or expanded through the immigrant’s investment of capital.

Purchase of an Existing Business that is Restructured or Reorganized

The immigrant investor can invest in a business that existed on or before November 29, 1990, provided that the existing business is simultaneously or subsequently restructured or reorganized such that a new commercial enterprise results. [50] Cosmetic changes to the décor, a new marketing strategy, or a simple change in ownership do not qualify as restructuring.

However, a business plan that modifies an existing business, such as converting a restaurant into a nightclub or adding substantial crop production to an existing livestock farm, could qualify as a restructuring or reorganization.

As explained (unofficially) in training materials for USCIS adjudicators,

This part of the regulations allows for the alien to purchase a business that was already in operation as long as it was changed to such a degree that one could consider the resulting business as completely new and different from the one that existed previously. For example, if an alien purchases a budget hotel and continues to operate it under a different business name, we would require more evidence of reorganization and restructuring. Look for real changes in modes of operation, products and services offered, business structure, organization of personnel, and other aspects which would indicate that a new business has resulted. Note that it is not enough that an entity merely be reorganized or restructured. It must be reorganized or restructured to such an extent that a new business has resulted.  (quoted from p. 752-753 of IIUSA DOC0042012 USCIS EB5 Training Materials – Oct 2012)

Each NCE is different and will require different evidence and analysis. If an investor has purchased an existing business, he or she must provide evidence of when that original business was created. Evidence of a business that has been in operation for many years and has only recently changed names or reopened after being closed for a short time may also be relevant. (quoted from p. 348 of USCIS EB5 Training Materials – April 2015)

The following cases have been mentioned as examples that do or do not qualify as the kind of restructuring and reorganization contemplated by the regulations (with sources – all unofficial/non-precedent except the Policy Manual and Matter of Soffici — in parentheses)

Examples that may meet the standard

Examples judged not sufficient to meet the standard

  • Putting a Howard Johnson’s Motor Lodge under new ownership, making some changes to the hotel décor, and implementing a new marketing strategy (Matter of Soffici)
  • Incorporating what used to be a division within a larger company (Mar312006_01B7203)
  • Bringing a hotel back from foreclosure (Jan282009_01B7203)
  • Renovating a hotel facility (adding miniature golf, fitness center, business center) and adding new services (free breakfast) (Mar272009_02B7203)
  • Purchasing a dairy farm and switching to higher-producing cows, changing distributors, and adding feed production (Jul282009_01B7203)
  • Reorganizing a dairy from a corporation to a partnership, but keeping the same employees, equipment, and cows. (EB-5 Training Materials)
  • Changing the name of a taxi service changes and adding a new limousine to its fleet (EB-5 Training Materials)

Note that the “restructure/reorganize”option is particularly relevant to direct EB-5 investors, who must invest in a “new” commercial enterprise that is also the job-creating business owner. Regional Center investors have the option to invest in an entity that’s separate from the job-creating enterprise, and that separate JCE is not required to qualify as “new.” The non-precedent decision MAR252016_02B7203 on a regional center case clarifies that “In Izummi, when determining what constituted a ‘new commercial enterprise,’ we reviewed the date of creation of the entity in which a petitioner had invested or intended to invest, not the job creating entity where the funds were ultimately to be deployed.”

About Suzanne (www.lucidtext.com)
Lucid Professional Writing provides writing and editing services for businesses and scholars, and specializes in assisting clients to prepare business plans for filing with U.S. Citizenship and Immigration Services.

2 Responses to What does “restructure and reorganize” mean?

  1. Interesting explanation behind the meaning of restructuring and reorganizing.

  2. Pingback: Options for investing in an existing business « EB-5 Updates

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