Recently, I shared a tip on social media platforms such as Facebook and LinkedIn, which generated a significant number of reactions and feedback via email. The tip stated, "E2 VISA: If you have to remember only one piece of advice from me, let it be this! "DON'T SIGN ANYTHING WITHOUT A CONTINGENCY CLAUSE TO OBTAIN AN E2 VISA (LEASE, BUSINESS ACQUISITION....)". If the visa is refused, you would be in a very complicated situation."
In light of the feedback received, I would like to clarify the concept further in this article.
The contingency clause for obtaining an E2 visa is a clause that allows for the cancellation of a contract if the condition of obtaining the E2 visa is not fulfilled.
This clause can be included in various types of contracts, such as:
As an example, here is a standard clause that I use in my contracts, with necessary adaptations to each specific case:
"This purchase contract and the parties' rights and obligations hereunder shall be contingent upon Mr. or Mrs. X obtaining an E2 Investor visa on or before May 5, 2017 (the contingency period). The visa contingency period may be extended from time to time by the buyer at its sole and absolute discretion."
The consequences of the E2 visa contingency clause are straightforward. If the visa is accepted, the contract proceeds as planned, and the business is purchased, the premises are occupied, or the equipment is received. However, if the visa is denied, the contract is cancelled, and any funds paid are reimbursed.
There are some limitations to this clause.
Firstly, it is possible that the seller or owner of the premises may refuse to include this clause in the contract. In these cases, I, as a business broker, will explain the clause and its importance, highlighting our experience and successful track record in obtaining E2 visas. However, it is important to note that if the seller has the choice between an American buyer who pays 100% cash in 10 days without a contingency clause and a foreign buyer who pays in 2-3 months and whose acquisition can be cancelled if the visa is refused, the seller may choose the American buyer. In some cases, it is the broker rather than the seller who may refuse the clause, as the sale would be cancelled and their commission would be lost.
Another limitation is that sellers or landlords may increasingly ask for compensation in case of a refused E2 visa, as the business or property will be off the market for 2-3 months. This compensation could be in the form of a fixed amount or equivalent to 1-2 months of rent. While this can be a fair solution, it ultimately comes down to the negotiation and amount agreed upon.
Lastly, there may be concerns about the impact of the E2 visa contingency clause on the irreversible commitment of funds. However, it is important to note that according to the text 9 FAM 402.9-6(B) "The purchase of a business that is conditioned upon the issuance of the E-2 visa may still qualify as an irrevocable investment."
I shared this advice because I have been contacted multiple times by individuals who have purchased a business in the United States before applying for the E2 visa, were denied, and have faced significant complications as a result. By including the E2 visa contingency clause in the contract, it ensures that the investment is protected in case of a denied visa.
At E2 Visa Consulting, we consider it mandatory to include the E2 visa contingency clause in the contracts of the buyers we assist. Our track record of E2 visa approvals is quite high, with a success rate of 98%. However, as the decision-making process for visa applications is subject to human discretion, there is always a risk of denial. In order to mitigate this risk, we ensure that our clients are protected by including this clause in their contracts. This way, we can avoid any situation where one of our clients has purchased a business in the United States but is unable to obtain a visa and is left stranded in their home country.
If you are in the process of negotiating a contract, it is essential to inform the other party that you will be requesting the inclusion of this clause as soon as possible. If the clause is refused, it is important to understand the reasons behind this refusal, and whether it is coming from the seller or the broker, and to assess if it is an obstacle that you are willing to accept. This will allow you to make an informed decision on whether to proceed with the transaction or not.
Sylvain Perret is a business professional who has been living in the United States since 2010. Along with his wife Daphnee, he has established several businesses in the country, including Integrity International Brokers, an agency based in Orlando where he works as a business broker, real estate broker, business consultant, and business plan writer. Over the years, he has helped numerous clients from around the world achieve success in their projects to create or take over a company in the United States with an E2 visa. He is highly knowledgeable about U.S. immigration issues and is the author of the book "S'expatrier aux USA grâce aux visas d'entrepreneurs," which is soon to be translated into English. Sylvain is also a Certified Business Intermediary (CBI) by the International Business Brokers Association and is regularly consulted on issues related to this field. At the age of 50, Sylvain chose to enhance his expertise in finance and strategy by pursuing a Master of Business Administration from the University of Central Florida. He successfully graduated in May 2023, adding a valuable finishing touch to his knowledge. He is active on LinkedIn and Twitter, where he shares his insights and experiences with a wider audience.
Last Updated on January 16, 2023 by Sylvain Perret