Role of the regional center
A regional center that sponsors an EB-5
offering, which enables the sponsor company
to utilize not only direct jobs, but also indirect
and induced jobs, plays a key role in the EB-5
program and it is extremely important to clarify
the role of the regional center in a particular
transaction. Generally, a regional center
can play the following three roles in any
EB-5 transaction, among others:
1. Sponsoring the project. At a bare minimum,
the regional center must sponsor the project and
take responsibility for ensuring that the offering and
procedures related thereto at least meet the minimum
guidelines required under the EB-5 program as part of the
minimum due diligence responsibilities of the regional
center. In connection therewith, the regional center is
paid compensation for services rendered, which should
be adequately disclosed in the offering documents.
2. Serving as manager/general partner of new commercial
enterprise. In many cases, the regional center (especially
where it is not affiliated with the developer/project
company), may serve as the manager/general partner
of the new commercial enterprise (“NCE”) formed to
undertake the EB-5 offering. In connection with that
role, it is important to specifically articulate the role of
the regional center and/or its affiliate in managing the
entity, including, but not limited to, various reporting
requirements, oversight of the EB-5 program with respect
to immigration matters and, most importantly, the
administration of the operation of the NCE (including,
but not limited to, assisting in all aspects related to the
due diligence and enforcement of the loan provisions
that normally apply with respect to a regional center
EB-5 project). In connection therewith, it is important
to disclose exactly how the regional center and/or its
affiliate intends to undertake its due diligence and
administrative responsibilities and whether or not thirdparty professionals will be engaged to provide any of those
functions. By way of example, in connection with a typical
real estate-related EB-5 program involving significant
construction activities, it is common for the manager/
general partner to engage a qualified disbursement agent,
title company or financial institution to administer the
loan disbursement in order to protect the EB 5 loan.
A good practice would be to interpose an
entity between the LP/NCE and the regional
center to be the GP/manager and thereby
minimize the liability of the regional center
in the event that the project/joint commercial
enterprise fails and the partners, members
or any other creditors of the NCE decide to
make a claim against the GP/manager for
failing to protect the NCE, or that the GP/
manager improperly administered the NCE.
3. Assisting with marketing. In addition to sponsoring
the project and serving as a manager of the NCE, the
regional center can also assist in the marketing of the EB-5
offering. In assisting in marketing activities, the regional
center has a further responsibility to ensure that such
activities are in compliance with U.S. securities laws and,
in all cases, should ensure that the EB-5 offering otherwise
complies with U.S. securities laws. In particular, the offer
and sale of securities to investors under the EB-5 offering
will need to fall within the permitted exemptions from
registration under Regulation S and/or Regulation D of
the Securities Act of 1933 (the “1933 Act”) and otherwise
not violate the registration requirements related to
broker-dealer registration under the Securities Exchange
Act of 193 B