E-2 Transaction Structure
E-2 Escrow and Visa Conditioned Investments
How escrow can satisfy the E-2 irrevocable commitment requirement while protecting a business acquisition if E-2 classification is not granted.
Direct answer
What the governing framework requires
The current FAM expressly recognizes that a business purchase conditioned on issuance of the E-2 visa can still constitute an irrevocable investment when the investor has entered a genuine agreement and committed the funds to escrow for release or transfer once the visa condition is satisfied.
01 · Legal Rule
Visa conditioned escrow is expressly recognized by the FAM
9 FAM 402.9-6(B) states that a purchase conditioned on issuance of the E-2 visa may still qualify as an irrevocable investment.
The important facts are that the investor has entered into an actual agreement and has committed the investment assets.
02 · Funding
Signing the escrow agreement is not enough if the required money was never deposited
The investment record should establish the amount placed into escrow, the date of funding, the account receiving it, and the source of the funds.
The amount claimed as committed investment should reconcile with the purchase agreement and escrow records.
03 · Release Conditions
The release conditions determine whether the commitment is genuine
A condition based on the E-2 adjudication can coexist with genuine commitment.
Broad cancellation rights allowing the investor to withdraw for unrelated reasons can raise a different issue because the capital may remain revocable.
04 · Business Acquisition
Escrow is particularly useful when purchasing an existing company
A seller may not want to transfer the business before the investor can lawfully enter and operate it.
The investor may not want to complete a nonrefundable acquisition if the immigration classification is unavailable.
A properly structured escrow can address both concerns while preserving the required E-2 commitment.
05 · Source of Funds
Escrow does not eliminate source and path requirements
The investor should still document how the escrowed money was acquired and how it reached the escrow account.
Escrow establishes commitment; it does not prove legitimate origin by itself.
06 · Evidence
The transaction documents should tell the same story
The purchase agreement, escrow agreement, bank records, and legal submission should describe the same conditions and amounts.
- Executed purchase agreement
- Executed escrow agreement
- Escrow funding confirmation
- Bank transfer records
- Source of funds evidence
- Release provisions
- Closing documentation if completed
Questions and answers
Frequently asked questions
Can an E-2 purchase depend on visa approval?
Yes. The FAM expressly recognizes a visa conditioned purchase where the investor has genuinely committed the funds through escrow.
Must the escrow account actually be funded?
The investor must establish a real commitment. A merely signed arrangement without committed capital may be insufficient.
Can escrow money be refunded if the E-2 is denied?
A properly structured visa condition may provide for that result while still satisfying the E-2 commitment rule.
Can escrow be used for a franchise?
Potentially, depending on the transaction and the contractual commitments involved.
Does escrow prove source of funds?
No. Source and path of funds remain separate evidentiary questions.
Can the investor cancel for any reason?
Broad unrestricted cancellation rights can undermine the claim that the investment is irrevocably committed.
Case-specific review
Structure escrow before signing the final transaction
A review can identify cancellation rights, funding problems, inconsistent agreements, and other provisions that could undermine commitment.
Request a Consultation