Personal Immigration
Business Immigration

Arshad and Others (Tier 1 applicants - funding - "availability") [2016] UKUT 334 (IAC)

The Upper Tribunal has once again looked at the Rules relating to the Entrepreneur category, in a determination which focusses on the availability of funds to invest in a UK business, specifically, where the funding is provided by a Venture Capital Firm.

The first thing to note about this case, is that all Appellants made their applications between January and April 2013 and therefore the law referred to in the decision relates to the Rules which were in force at that time. As anyone familiar with the category will be aware, there have been several substantial amendments to the Rules, including regarding who is permitted to rely on Venture Capital funding and the specified evidence required to prove that such funding is available. The fact that the applications were all made shortly after January 2013 is also significant because this is when the genuine entrepreneur test was first introduced for applicants making an initial application to enter the entrepreneur category.

Availability of Funds

Upper Tribunal Judge McCloskey states that the word ‘available’ doesn’t have any special meaning and that the Rules contemplate that on the visa being granted the business will be established and the money required to invest in it. He goes on to state:

‘We accept that, in the real world, some delay will normally eventuate. However, it is clearly implicit in the Rules that this will be of very short dimensions. Based on this analysis, we consider that £50,000 is “available” only if this sum is capable of being invested in the business within a short period of the grant of a Tier 1 visa. Cases where this cannot be effected are antithetical to the clear thrust and philosophy of the Rules.’

This is problematic.

As observed by Mr Justice McCloskey in Chau Le (Immigration Rules – de minimis principle) [2016] UKUT 186 (IAC):

‘The Immigration Rules and the Points Based System in particular, set out clearly, the criteria to be met or the requirement to acquire a certain number of points. […] Having construed the rule, the next question is whether, on the facts found and/or admitted, the applicant’s case complies with the relevant rule. In our judgment this is a black and white question. Either the applicant satisfies the Rules or he does not. No intermediate, or third, possibility exists. The prevalence of “bright line” provisions in the Immigration Rules has been repeatedly considered lawful as they promote consistency, certainty and equality of treatment among immigrants.’

The idea, therefore, that something could be implicit in the Immigration Rules, and particularly in the Points Based System Rules which are supposed to be ‘black and white’, ‘satisfies the rules or does not’ etc, contradicts the established purpose of the Points Based System requirements.

The Immigration Rules are required to be explicit. There is no such thing as an implicit requirement. What the rules explicitly require is that all the investment funds, whether this is £50,000 or £200,000, are invested within the initial grant of leave, before the extension application is made. There can be no implicit requirement that this is ‘within a short period’.

The business must be established within six months of the grant of leave or entry to the UK. This is explicit. But, there is no requirement that the investment of the funds must immediately follow.

Funds for the business might not be required right away; a business can be started with a small amount of funds and it might not be necessary to invest the funds until expansion is planned or employees are hired further down the line. A business decision to make the investment over the course of the three year period does not mean that the funds are not available or that the business is not genuine.

However, this statement has to be considered in the context of the facts of the case. This case relates to Venture Capital Funding only. Where an individual applies on the basis of their own funds, or on the basis of funds gifted by a third party, there is a requirement to show a bank account containing at least the £200,000. The money has to be available, in cash, ready to invest. It is not right to say that the Applicant is required to invest the funds immediately, but he or she is required to be in a position to make the investment immediately.

Therefore, the requirement that Venture Capital funds should also be ready and waiting, assigned to a particular applicant and ready to invest, really only matches what other applicants are required to show. It might not be in accordance with the industry standard, but it is at least consistent with what is required from other applicants in the same category.

This creates a difficulty for individuals who want to rely on Venture Capital funding. The easiest way around this is for the funds to be invested prior to making the initial application. However, this may not be an option for some applicants. In order to apply on the basis of funds which have been invested the applicant is required to be a company director (or self-employed) and be a signatory on the business bank – something that cannot usually be achieved for individuals who are outside the UK.

The alternative is that the VC firm provides evidence, further than what is specified in the Rules, to confirm how much money they have available in cash and how much of that money has been promised to other parties. The ability to do this will depend on the willingness of the VC firm to provide this information to their investees and the Home Office.

Applicants will have to do their due diligence on VC firms to ensure that they are satisfied that the money is genuinely available, so as to avoid their application being refused through no fault of their own.

Genuine Entrepreneur Test

Upper Tribunal Judge McCloskey goes on to make more general statements about the nature of the genuine entrepreneur test and how it should be applied. He states:

‘First, the language (“may take into account the following factors”) makes clear that the Secretary of State is not obliged to take into account all or any of the contents of the list which follows. The second is that the Secretary of State is empowered to take into account other facts and considerations. This would, of course, be subject to the well established legal constraint that any other facts or considerations weighed must be material.’

The confirmation that the Secretary of State can take into account factors other than those listed in the rules is not controversial. However, many practitioners will be familiar with totally irrelevant factors that are frequently taken into consideration as part of a genuine entrepreneur test, and the decision-maker having no regard to the materiality of those factors.

Any applicant intending to make an entrepreneur application should ensure that they provide sufficient evidence of their intentions to run a business in the UK and of their ability to do this. While there is no specified evidence other than the business plan, the reality is that the Secretary of State is empowered to consider wide ranging factors when determining whether or not an applicant’s intentions are genuine, and therefore more evidence will be necessary. Any Tier 1 (Entrepreneur) application will need to be prepared very carefully.

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