The Matter of Z-H- case at the AAO was decided late last year and provided a welcome relief for professionals and investors in the EB-5 world. In the past, USCIS seemed to bend over backwards to contend that non-guaranteed plans for eventual investor repayment violated the rule against guaranteed redemption and use that as the basis for denying petitions. USCIS lost on this matter in litigation a number of times in recent years and it appears the AAO is now coming around on the issue.

In this case, the offering memorandum and operating agreement of the investment vehicle stated three exit scenarios - buyout by the operating partner, continuing to operate the business until it reaches a specific value, and then a third scenario that is somewhat convoluted but basically amounts to the investors taking over day-to-day operations. Initially, the investor program office denied the investor’s I-526 petition, alleging the buyout scenario (somehow) created a guaranteed right of redemption.

The investor was given a chance to clarify some of the statements in the operating agreement (but not make any wholesale changes), which he or she did in such a way that satisfied the AAO that the petition should have been approved. So at least this one has a happy ending for the investor, unlike some similar cases in the past (though some of those were ultimately corrected through litigation). This was very clearly not a guaranteed redemption - it did not have a specific time or price or agreement between buyer and seller. Instead, the operating agreement appeared to basically just outline three plausible scenarios that might happen down the road. Fortunately, the AAO eventually stepped in to see the right result occurred.