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Immigration Law Diligence In M&A Deals: Top 10 Commandments

Immigration law diligence in M&A deals: Top 10 commandments

Corporate transactions like mergers or acquisitions are major milestones in the lifecycle of many companies. Such deals to sell or buy a company or key assets are a big deal – they likely present a lucrative exit opportunity or promote a strategic growth plan. Corporate counsel and other members of the deal team typically focus on important legal issues such as tax structuring and consequences, securities compliance and corporate governance, along with essential business and financial considerations.

But immigration issues must not be overlooked in planning and implementing the transaction, especially if the companies involved have a workforce that includes foreign nationals. Although the tail should not wag the dog when doing a deal, immigration compliance issues are a critical aspect of any M&A due diligence review. The last thing a buyer wants is to inherit a compliance mess or even lose a key executive or founder who cannot preserve a work visa or green card process after the deal closes.

The following are some useful reminders (okay, commands) for approaching immigration due diligence in an M&A deal. Thou shalt:

1 – Assess the immigration issues in advance!

The deal team should coordinate on immigration-related issues well in advance of the closing date – ideally during critical planning and negotiation phases of the transaction.

2 – Look at your I-9 issues.

Get the house in order regarding compliance with I-9 Employment Verification requirements.

  • Will the buyer be assuming existing I-9 compliance obligations, or will workers be re-hired by acquiring company?
  • Internal review (“self-audit”): are there I-9 records proper retention periods for the entire U.S. workforce?
  • Are there potential substantive or technical violations in the records?
  • Does the employer participate in E-Verify and comply with program requirements?

3 – Take stock of foreign workers’ visa statuses.

Survey the foreign national population involved to understand the lay of the land for employees with temporary work permits and permanent residence (green card) applications.

  • Who holds temporary work authorization (H-1B, E-1/2 or E-3, L-1, O-1, TN visas)?
  • Are there any labor certification (PERM) processes underway for foreign personnel?
  • Have I-140 immigrant worker petitions been filed/approved?
  • Are there any personnel with Adjustment of Status (AOS) applications pending in connection with employment-based green card processes?
  • Any students on F-1 practical training (OPT)? Will the target/surviving company participate in E-Verify?
  • Are there foreign personnel using the B-1 business visitor category?
  • Are there any key employees (e.g. founders or C-level executives) with employment agreements?Were any promises/representations made with respect to sponsoring temporary or permanent immigration status?

4 – Understand sucessor in interest rules.

Take advantage of successor in interest provisions in the law. Will the target/surviving company succeed to all immigration liabilities and obligations?

  • Eligibility depends upon the nature of the transaction – e.g. asset purchase or entity acquisition.
  • Need to include language in the definitive documents that includes express assumption and acceptance of immigration liabilities in order to qualify for successor-in-interest provisions of immigration law that are essential to preserving immigration status and sponsorship processes for certain foreign nationals in the workforce.

5 – Quarterback your H-1B compliance.

Ensure that you maintain H-1B compliance (especially Public Access Folders) for H-1B workers.

  • If target/surviving company is successor – need to include sworn memorandum in the Public Access File for each affected H-1B worker. Get it prepared in advance and included as a closing deliverable.
  • Are there any material changes in the terms and conditions of employment (primary job duties due to re-orgs, geographic relocation outside normal commuting distance, etc.)?
  • May require remedial action through timely filed amended petitions to US Citizenship & Immigration Service (USCIS).

6 – Are employees in the midst of the green card process?

Preserve green card processes (also called the permanent residency processes or adjustment of status) for sponsored foreign national employees.

  • Who is being sponsored for green card and what stage of the process – i.e. PERM labor certification, I-140 or Adjustment of Status (AOS)?
  • Successor-in-interest considerations: can the new employer simply inherit and maintain green card processes that are underway?
  • Will foreign employees stay in “same or similar” occupations as those represented in their green card application processes?
  • Can some workers rely on AOS “portability” rules to transfer an approved I-140 immigrant worker petition and preserve a pending green card process?
  • Pending PERM labor certification processes – may need to re-start the application with another test of the U.S. labor market.
  • Reductions in Force (RIF) associated with post M&A integration may affect PERM processes under Department of Labor regulations.

7 – Do you have L-1s or E-1/E-2s?

Assess the ownership & control changes on qualifying organizations for L-1 and E-1/E-2 visa holders and employees in the multinational manager green card process.

  • L-1 visas & Multinational Manager green cards: will a qualifying organization continue to exist after close?
  • E-1/E-2: will treaty nationality be preserved after the deal closes?

8 – Look at export control issues.

Screen for workers affected by U.S. export control regulations – i.e. those with access to sensitive technologies or commodities controlled by Commerce Department (dual-use technologies and items) and State Department (military/defense articles).

9 – Review your HR policies.

Review and update immigration sponsorship policies in coordination with the HR team.

10 – Talk with an immigration lawyer before the deal.

Consult with immigration counsel in advance! Issues that may be solveable on the front end may be impossible once a deal has been inked.

 

© Mike Allen (2017)

Immigration law diligence in M&A deals: Top 10 commandments
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Mike Allen

Mike helps U.S. businesses find practical immigration solutions for their staffing needs.

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