A blog about U.S. immigration matters by Paul Szeto, a former INS attorney and an experienced immigration attorney and counsel. Contact Info: 732-632-9888, http://www.1visa1.com/ (All information is not legal advice and is subject to change without prior notice.)

Tuesday, October 23, 2012

Purchase price of U.S. company is not a consideration for L-1 visa petition

Buying a U.S. subsidiary with substantial revenues for about $51 is not a reason for denying an L-1 intercompany transferee visa petition, according to a recent decision by the Administrative Appeals Office (AAO) of the USCIS.

A U.S. company may transfer a foreign business executive or high-level manager to work in the U.S. from a foreign affiliate pursuant to section 10l(a)(15)(L) of the Immigration and Nationality Act.  In this particular case, the petitioner is a California limited liability company engaged in the distribution of prepaid calling cards to the Latin American market throughout the United States. It filed an L-1 visa petition as a majority-owned subsidiary of a Mexican company on behalf of a foreign national for the position of a general manager. 

The petition was denied by the director of the California Service Center (CSC) after concluding that there did not exist a legally valid parent-subsidiary relationship between the foreign company and the U.S. entity.  Specifically, the CSC director challenged the sale by arguing that the Mexican company did not in fact pay for the U.S. entity because of the purchase price is too low in light of the revenues of the company.  The Mexican parent here became the majority owner of the California company by acquiring 51 member units in the U.S. entity by paying $1 per unit.  After the acquisition, the parent company owned 51% interest of the U.S. entity.  

In denying the L-1 visa petition, the director focused on the unusually low purchase price and lack of actual cash transfer for a company with substantial revenues. The petitioner filed an appeal, arguing that the USCIS is not in the best position to apply its business judgment for that of the owners of the parties in the transaction.  The petitioner also argued that the low purchase price is justified by the existence of considerable debt and expenses in its books.  Specifically the U.S. company had net liabilities of over $250,000 as of September 2010. The petitioner explained that the Mexican company was interested in acquiring the California company due to its existing calling card distribution network in the U.S.  Additionally, as part of the deal, the Mexican parent entered a conditional Contribution Agreement to provide $200,000 to the California company to satisfy its creditors.

The AAO accepted the explanation of the petitioner.  After reviewing the regulatory requirements of the L-1 visa, the AAO concluded that the petitioner met its burden of proof by providing sufficient evidence to establish eligibility. Specifically, the AAO concluded that a "parent and subsidiary" relationship did exist between the foreign company and the U.S. entity after the former acquired a 51% majority interest in the later.  The AAO also found explanation of the petitioner reasonable regarding the low purchase price and the financial position of the U.S. company.

Although the decision did not change any substantive aspect of the law regarding the L-1 petition, it is still an important decision.  It provides further guidance to USCIS adjudicators as to what issues they should focus on when reviewing immigration petitions.  The decision also confirms the notion that the parties in a business transaction are free to structure a deal based on financial and business considerations without having to conform to certain expectations of government agencies.  In a capitalistic society, such freedom is particularly important as the parties in a business transaction are in the best position to make their decisions. 

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