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Successor In Interest: M&A And Extended Horizon For Multinational Executives/Managers

by Pravinchandra Patel

One specific issue of great significance that frequently arises in the context of mergers & acquisitions (M&A), and impacts multinational executives or managers in either an EB-1-3 immigrant visa classification or a nonimmigrant L-1A classification. I have confronted it in a number of cases in the last two years, and I may add, with unqualified success. This brief article is an attempt to share my experiences with the immigration bar.

Initially, imagine the following two sets of companies. On the one hand, a U.S. subsidiary of a Japanese parent company, with a Japanese national in the United States in L-1A status; on the other hand, a U.S. subsidiary of a Swedish parent company.[1]

The M&A context in this scenario is injected when the U.S. subsidiary of the Japanese parent company is purchased by the U.S. subsidiary of the Swedish parent company, lock, stock and barrel. As far as the Japanese national in L-1A status is concerned, he had worked for the Japanese parent company in Japan, but had never worked for any of the Swedish affiliated companies abroad.

For L-1A status in general, it is necessary to establish that the beneficiary of any nonimmigrant L-1 petition must have worked abroad with any qualifying organization in an executive or managerial capacity for at least one year in the preceding three years prior to coming to the United States. While there is an exception in a blanket L-1 petition scenario as of January 16, 2002,[2] we are not concerned with that exception for our present discussion.

Now, to ensure a smooth transition after M&A, the purchase agreement between the Japanese and Swedish organizations requires that the Japanese L-1A employee must continue and discharge his managerial functions for the new company for one year. Because the acquisition has resulted in a material change in that the new employer is a different company, it has to file a new or amended L-1A petition to establish both: i) the new employer's eligibility as an L-1 company, and ii) the beneficiary's continuing eligibility as an L-1A employee. Indeed, there are several Central Office memos that clearly require such a new/amended filing within a reasonable time.

To establish the necessary qualifying corporate affiliation or parent-subsidiary relationship here, which is a necessary L-1 visa requirement, is rather easy. For it can be easily shown that there are two entities, one in the United States and one abroad, and that the U.S. entity is a subsidiary of a Swedish parent company.[3] Also, there is no doubt that the Japanese national in L-1A status continues and will continue to work in a managerial capacity.[4]

However, the tricky issue arises when we consider that the L-1A beneficiary had never worked abroad for either the new employer or any of its affiliates at any time in Sweden or any other country abroad. Therefore, the question is whether he continues to remain qualified for L-1A status after the M&A implementation.

I thought about the situation and researched it thoroughly but could not find anything in any resource materials directly on point. Nonetheless, I sincerely believed that there was a reasonably good possibility of advancing a creative idea based on the general concept underlying the "successor in interest" doctrine. My research led me to believe that the Service may be ready for taking one more step and recognizing my creative extension of that doctrine. My considered thought and calculated presentation, with the concurrence and confidence of my client in each instance, ultimately bore sweet fruits not just in one case but also in all identical cases thereafter in the last two years in various Service Centers.[5]

Let me explain how I did it: My first and foremost argument was based on the concept of "successor in interest" for immigration purposes. One has to remember the evolving scenario regarding this concept. In the beginning, the Service interpreted it very narrowly in any immigration context, be it labor certification, I-140 petition, or nonimmigrant I-129 petition. This narrow and restrictive interpretation required a showing that the new company must have assumed all assets and liabilities of the purchased or merged company to be able to derive any right or interest emanating in any immigration context. Obviously, to allow any successor company to step into the shoes of the predecessor company only if it has purchased or assumed all assets and liabilities of the purchased/merged company was too unrealistic a gloss. It was unrealistic only because in the practical reality of the business world, rarely can a company demonstrate that it has assumed all liabilities of the purchased/merged company. In most M&A scenarios, it is primarily the asset purchase agreement or arrangement between two entities. There was therefore a continuous stream of objections to this initial interpretation for some time.

As the time passed by, the Service realized the undue strictness and the extremely limiting scope of such narrow interpretation, and at last refined it to make it a realistically liberal and workable one. Under the refined version, [6] as explained in recent official policy declarations or guidance issued by the Director of Business and Trade Services of the BCIS Central Office, I quote:

The Immigration and Naturalization Service's (INS) policy is that a new employing entity that is a successor in interest must file a new I-140 petition . . . . to establish that it has assumed the rights, duties, obligations and assets of the original employer . . . . [Internal citation omitted] Without such documentation the INS is unable to reaffirm the validity of the initial Form I-140 petition and the labor certification. The INS has taken the position that a company is a successor in interest when it has taken on all of the immigration-related liabilities of the company it has acquired, merged, etc. [Emphasis added] [7]
Indeed, the same office had provided a similar guidance in a nonimmigrant context a few months earlier on June 7, 2001:

. . . . The INS has consistently interpreted this requirement to mean that where a second company assumes substantially all of the assets and liabilities of the first company, . . . . . INS has also stated both at conferences and in correspondence that the assumption of liabilities refers to immigration-related liabilities, such as LCA obligations and violations thereof. It does not refer to non-immigration-related obligations and liabilities, such as environmental or tort obligations, for example. . . . . [Emphasis added] ."
Given this history and the fact that the INS (now BCIS) had been amenable to a more favorable and liberal interpretation of the concept of "successor in interest," I believed that it was possible and time for someone to have it extended just a little bit further while the iron was hot, so to speak, to cover the issue under discussion. After all, when a company purchases or merges with another company with a condition that the purchased or merged company's top level employee or employees must continue to work for the new company, obviously it is because of the need for a smooth transition. Also, if the new company assumes all the immigration-related liabilities and obligations, why should it not be allowed to assume all immigration-related rights and interests and thus assume whatever it takes to keep essential and key personnel in the United States, as long as all other legal requirements are satisfied. It is certainly reasonable and sensible to permit key and essential L-1A employees, brought at considerable efforts and expense, and who are already functioning as essential part of the corporate establishment in the United States, to continue in the same status that they have rightfully enjoyed from the beginning.

In a legal memorandum in each case, I advanced these and other arguments to claim continuing L-1A eligibility of all such employees.

Indeed, in my later cases, I also made a reference to the fact that other Service Centers (or the same Center in other identical cases) have approved a similar claim. Of course I did it just in a passing manner. I did not make, and I frankly stated that I was not making, an argument that my case should be approved simply because other identical cases had been recently approved by the same Service Center and other Service Centers. Obviously, that cannot be the sole reason for approval even in the same Service Center. Nonetheless, I submitted that it was a factor that could not be entirely neglected. Rather, it should be taken into account along with all other significant and substantial reasons. After all, uniformity is an avowed goal in the administration of immigration law. Indeed, uniformity and consistency in the administration of the immigration law may inspire confidence and increase agency credibility.

As one can readily see, the basic argument is no more than a slight extension of the interpretive process regarding the doctrine of "successor in interest" as applied to immigration cases, for it allows a new company to simply assume all the rights and interests held by the merged or the acquired company including the right/interest emanating from or inherent in the alien's prior employment abroad. If the law as explained in the cited Service correspondence allows the new company to step into the shoes of the merged/acquired company and continue the immigrant and/or nonimmigrant visa process for any alien employee, there is no rhyme or reason not to allow it to continue employment of L-1A employees. Indeed, there is nothing in the law squarely prohibiting such limited extension of the concept of "successor in interest."

[1] I have used these two country names only for convenience and also to avoid any possible confusion. However, basically it does not make any difference whether it is Japan or Sweden or any other country or countries. The underlying concept and principle remains the same. Indeed, the writer has used the concept described in this article for companies of other countries as well.

[2] INA 101(a)(15)(L) was amended by Public Law 107-125, 115 Stat. 2403, effective January 16, 2002, pursuant to a corresponding amendment to 214(c)(2)(A), to reduce the required overseas employment of L-1 aliens from 1 year to 6 months, applicable only if the employer has filed a blanket petition.

[3] I am proceeding on the assumption that readers are generally aware of all the L-1A statutory and regulatory requirements, one of which is that there must be a corporate affiliation between the U.S. company and the company overseas.

[4] Again, it is a threshold requirement for L-1A classification that the person must have been employed abroad in a capacity that is executive or managerial in nature, and must continue to perform similar functions in the United States.

[5] I have so far handled about a dozen cases in three Service Centers (Vermont, Nebraska and California) with the identical issue and favorable result in all.

[6] I say it is a "refined version" only euphemistically, for, quite frankly, it was an about face or a virtual reversal of its earlier stand on the part of the Service.

[7] [See the INS correspondence referenced as: "HQ 70/6.1.3," dated October 17, 2001, reproduced Appendix IV in 78 Interpreter Releases 1694-95, dated October 29, 2001.]

About The Author

Pravinchandra J. Patel, Esq. can be reached at 1554 Sherwood Drive, East Meadow, New York 11554; (516) 565-2665; email: For over two decades, he has authored/compiled and regularly updated source materials for fellow immigration attorneys through his immigration books, see The opinion and information expressed in this article is not intended to provide guidance in any specific case or to any individual. Rather, it is intended for general information, and is subject to change in the future, if necessary, to reflect any subsequent contrary policy decision or guidance by BCIS.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.