New Commercial Enterprise (NCE)

What is a New Commercial Enterprise?

In the EB-5 program, a new commercial enterprise (NCE) is any lawful, for-profit business entity. The NCE is also know as the EB-5 fund. EB-5 investors are added to the NCE as a member, limited partner or other owner/shareholder.

Regional center investments involve multiple EB-5 investors who purchase equity stakes in the EB-5 fund. The fund then either purchases equity, as an equity partner, in the job-creating entity, or loans the money to the job-creating entity (JCE).

Often, but not always, the NCE is a  a different entity from the JCE.

An NCE can one of  many different forms and structures including a sole proprietorship, partnership (limited or general), holding company, joint venture, corporation, business trust, or some other publicly or privately owned entity.

New NCE’s must be established after November 29, 1990; however, the restructuring of an existing business allows for businesses established before this date. The establishment of a new commercial enterprise does not have to involve EB-5 investors and can thus predate the subscription of EB-5. 

In the Regional Center Program, a regional center is the managing general partner of the NCE. In a direct EB-5 investment, the NCE is the same entity as the JCE.

Use of investor capital by the NCE

In the Regional Center Program, the EB-5 investor capital must be deployed from the NCE to the JCE. This capital cannot be for the NCE's expenses, such as legal, tax or accounting charges. 

However, interest or other returns that the NCE may receive from the JCE as part of the loan or preferred equity may be used to pay NCE expenses.

Investor management of an NCE

USCIS requires that an investor must be engaged in the management of the new commercial enterprise; this may be done through day-to-day managerial responsibility of the business or simply through policy formulation and voting rights; the latter is the preference of regional center investors who don’t want to actively manage a business.

Contrary to popular opinion, USCIS has exactly the same NCE management requirements EB-5 investors in either the Regional Center Program or making a direct or standalone investment.

NCE investor obligations

The NCE Agreement should explicit explain the NCE obligations to EB-5 investors with respect to management and rights.

This includes providing all relevant documentation for I-526E petition, access to books and records; mailing of Schedule K-1s within 120 days after the end of the NCE's fiscal year; voting rights regarding dissolution; disposal of NCE assets outside the ordinary course of business; any amendment to NCE Agreement; redeployment; removal and appointment of Manager;. and the ability to provide direction concerning the business of the NCE, including the use of EB-5 capital.

Restructuring an existing NCE or business 

While this is an infrequent occurrence, an EB-5 investor has the right to  restructure an already existing commercial enterprise. However, merely managing an existing business will not fulfill USCIS job-creation requirements. EB-5 investor capital makes a substantial change (a 40% increase) in the net worth or number of employees of the existing business.

In such a case, a new commercial enterprise can include a commercial enterprise established on or before November 29, 1990.

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