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Immigration: F-1 visa start-up activities

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You are one of those sorts of people who are great at multi-tasking. You are also a foreign student on a F-1 student visa. You should really be studying for mid-terms, but your mind is preoccupied elsewhere. You have been burning the midnight oil, planning your first Start Up. You are not doing this alone of course, because your U.S. born roommate is planning the new business venture with you. This is convenient because you are together a lot of the time in the evening, which gives you plenty of opportunity to compile your Start Up business plan.

It’s not you, but your roommate, who suddenly questions the legality of setting up a Start Up if you are on a student visa and whether you have checked to see if you are allowed to do this. Because you had been so wrapped up finding your niche in the business world you hadn’t really thought whether what you were contemplating doing was legal or not. You had noticed that the information supplied with the foreign student I-20, F-1, or I-94 visas stated that authorization from the Government was required if you wished to work.

Fear creeps over you at the thought of all that time you had spent planning a lucrative Start Up and it could all be for nothing. No time is wasted. The next morning you go into the Foreign Student office and ask the question as to whether you are permitted to work while on an F1 visa. You get the answer you dreaded as you are told in no uncertain words that you must not work until you have graduated and then you will be eligible for OPT. Here is what an immigration lawyer could have told you.

A comment from an immigration lawyer

Anyone in the know who is on a F-1 student visa is fully aware that he or she cannot work unless authorized to do so by the government through the USCIS. If caught working in unauthorized employment you are breaching your F-1 status, which could jeopardize your stay in the U.S. and you may even be deported. This could shame your family and affect your long term career and earning potential. Is it worth the risk?

What is unauthorized employment?

Unauthorized employment is by definition “any services or labor performed by an alien for an employer within the U.S. that is not authorized.” As with many laws, there are often grey areas that are difficult to clarify when it comes to do’s and don’ts and F-I visas. However, the outline below should help you better understand your position.

First of all, if you are investing and managing your own business and this is what you spend most of your time doing, this is employment that will definitely be considered illegal and unauthorized. A recent example of this was an F-1 student who bought a fleet of hot dog vans which he leased to hot dog sellers and made money by collecting rent from a percentage of the sales of hot dogs.

The student on the F-1 visa took part in daily activities of the hot dog business by purchasing the hot dogs and other stock for the vans and now and again participated in selling. This is definitely classed as “unauthorized employment”.

However, the simple act of owning a business is not considered to be employment and some start up activities are definitely allowed and do not compromise an F-1 visa status. These include incorporating a company, conducting market and feasibility research, holding and attending start up business meetings, and the development of goods, products and services. You are also even allowed to participate in fund raising activities such as putting on presentations and negotiating with Angel Investors, VCs and attorneys in an effort to source funding for your business. These are considered to be passive activities, which are permissible while day-day active business related duties are not.

When it comes to what is allowed is not so much based on getting paid but more whether the relationship you have is an employee-employer relationship or not when it comes to business activities.

Passive or active is the key to an authorized F-1 activity

Running a business by employing workers is not authorized as this is considered active participation. However, the role as a Board member and major shareholder means you can select an officer who can hire workers on your behalf. Additionally, any important decisions regarding the daily running of the business could be directed to the board by your U.S. elected officer.

The following business activities should not negatively affect your F-1 visa status:

  • activities that aren’t considered employment e.g. taking orders for goods produced overseas;
  • negotiating contracts;
  • consulting with your business associates;
  • litigating;
  • taking part in conferences or seminars that are scientific, educational, professional, or business related;
  • undertaking independent research;
  • membership of a U.S. company’s board of directors;
  • seeking to invest in the U.S., which would qualify for E-2 investor status.

Curricular Practical Training (CPT) or Optional Practical Training (OPT)

CPT may be possible if practical training employment makes up some of your academic program or OPT if the employment is related directly to a major part of your study. Generally, OPT and CPT are available for 12 months only after completing your studies. The designated school official has to authorize this, whether the employment is during your study or after.

Changing to an H-1B specialty worker

This is hard to do, especially if you are trying to transfer based on your own business, as no one has direct control over you.

Other visa categories post study

After completing your studies, you may be eligible to apply for an H-1B Specialty Occupation visa, an O-1 Outstanding Ability visa, an E-2 Treaty Investor visa, a NAFTA “TN” Professional Visa (applies to Canadian and Mexican citizens) or an H-3 “training visa.”

Investigations in the Workplace

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Organisational preparation

The ACAS Code of Practice on Disciplinary and Grievance Procedures emphasises the importance of carrying out necessary investigations of potential disciplinary matters without unreasonable delay in order to establish the facts of the case. This is an important step employers often either overlook entirely or do not handle properly. This ACAS guidance is therefore welcome and worthy of careful consideration.

It is possible to settle most problems quickly and without undue process. An employer should therefore consider whether a quiet word or informal action might be all that is required to resolve a matter.

If an informal chat is not practical or possible the employer should consider a number of factors before commencing an investigation:

  • Will a preliminary investigation help?
  • Does the matter warrant further action?
  • Do any internal policies or procedures require an investigation?
  • Should the subject(s) of the investigation be suspended pending its outcome?

An employer should act promptly if an investigation is necessary. Upon instigating an investigation, an employer should decide the precise purpose and scope of the investigation, how long it will take, who should oversee the matter within the organisation and who should be the investigator.

Keep an investigation confidential.You may put temporary measures in place while you conduct the investigation, such as suspension or a transfer of the employee.

Unless there is a contractual right to suspend an employee without pay (which would be unusual), suspension should always be on full pay and confirmed in writing, with clarification that the suspension does not connote guilt or any indication of the likely outcome of the investigation.

An investigator’s preparation

Once you have made the decision to conduct an investigation, it may be beneficial to create an investigation plan to follow, providing a structured approach. Preparation may include:

  • Checking internal policies and procedures.
  • Identifying sources of evidence.
  • Identifying the parties relevant to the investigation.
  • Deciding in what order to collect evidence.
  • Arranging where meetings should take place.
  • Contacting the relevant parties and their managers.
  • Keeping managers informed of the process.

Handling an investigation meeting

While investigation meetings are often needed, some investigations only require the collection of written and physical evidence. An investigation meeting is an opportunity for an investigator to interview the individual involved, or someone who has information relating to the matter under investigation.

Although there is no statutory right for an employee to be accompanied at an investigation meeting (as it is not a disciplinary meeting), not being accompanied could leave the individual at an unfair disadvantage, and may be provided for in a work place policy. Therefore, it is often safer to offer the employee the option of having a fellow employee accompany him or her at an investigatory meeting, particularly if the facts under investigation are serious in nature.

Gathering evidence

Any investigator appointed should insofar as is possible be unconnected with matters under investigation. The investigator should remember their role is to establish the facts of the matter. They should consider evidence that supports the allegations and evidence that undermines the allegations. Once collected, an investigator should analyse each piece of evidence objectively and consider:

  • What does the evidence reveal?
  • Are there any doubts over the credibility and reliability of the evidence?
  • Is the evidence supported or contradicted by any other evidence?
  • Do the results suggest further evidence needs collecting?
  • Should written witness statements be prepared?

Evidence to consider collating includes witness statements, written records and documentation (e.g. attendance sheets and paper copies of electronic material), physical evidence (e.g. CCTV, computer and phone records) and searches of personal possessions.

If witness statements are to be prepared and relied upon, further investigation may be required to verify or undermine the information given. It might also be appropriate for omissions to be made to avoid identification of the witnesses.

Writing an investigation report

It may be helpful if the investigating officer prepares a report summarising the steps taken in the investigation, the investigations, and the evidence available in respect of them. Such a report might assist with the conduct of the disciplinary hearing. Any investigation report should cover all the facts that were and were not established, and whether there were any mitigating circumstances to consider. To exclude any information may leave an investigation open to accusations of bias and filtering evidence to suit one’s findings.

The report should reflect the investigator’s own conclusions. While an investigator may seek advice from a third party, such as HR, the conclusions should be their own.

An investigator will often be asked to make a recommendation. Any recommendation should be restricted to suggesting whether any further action may be necessary or beneficial. In most circumstances an investigator should recommend:

FORMAL ACTION

  • To initiate a disciplinary hearing.
  • Changes to an organisation’s policy or procedure.
  • Further investigation into matters uncovered.

INFORMAL ACTION

  • Training or coaching for parties involved.
  • Counselling for the parties involved.
  • Mediation for the parties involved.
  • Notification that further similar action may result in disciplinary action.

NO FURTHER ACTION

  • Counselling, mediation or another form of support that may be beneficial to the parties involved and the organisation.

It is important to note that it should be the decision maker and not the investigator who makes the final decision as to whether or not a disciplinary hearing will be held.

After an investigation is completed

Once an investigator completes their investigation and hands in their report they will not usually be involved in further action other than the following possible matters:

  • Discussing the report in person with the individual/panel, they report to.
  • Attending the disciplinary hearing.
  • Advising on any amendments or updates to the organisation’s policies and procedures.

There will usually be a need to retain investigation reports for a period. The report should be securely disposed of once it becomes irrelevant or out of date.

If you require help or further guidance, please contact us.

Implied terms

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THE TRADITIONAL UNDERSTANDING

The courts may imply a term into a contract to fill a gap in its drafting. The rationale for implying a term is to attempt to reflect the parties’ original intentions.

A long line of case law has developed the test for implying terms into a contract.

When determining whether a term should be implied or not, traditionally the following two tests are applied:

Business Efficacy Test

If it is necessary to give business efficacy to the contract, the proposed term will be implied.

“Officious Bystander” Test

If it is necessary to give business efficacy to the contract, the proposed term will be implied.

“Officious Bystander” Test

The proposed term will be implied if it is so obvious that it goes without saying, for example, if a bystander suggested to the parties that they include the term in the contract “they would testily suppress him with a… “oh of course””.

In the case of BP Refinery (Westernport) Pty Ltd v Shire of Hastings, Lord Simon proposed the following summary be regarded as cumulative when implying a term:

  • be reasonable and equitable;
  • be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
  • be so obvious that “it goes without saying”;
  • be capable of clear expression; and
  • not contradict any express term of the contract.

THE BELIZE CASE

In the Privy Council decision in AG of Belize v Belize Telecom, Lord Hoffman formulated the test for implied terms as follows:

“In every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. The courts have formulated this question in various ways (the implied term must “go without saying”, it must be “necessary to give business efficacy to the contract” and so on), but these formulations should not be treated as different or additional tests.”

Lord Hoffmann gave two examples of the dangers of treating alternative formulations of the question as if they had a life of their own:

Business Efficacy Test

“There are dangers… in detaching the phrase “necessary to give business efficacy” from the basic process of construction of the instrument. It is frequently the case that a contract may work perfectly well in the sense that both parties can perform their express obligations, but [without the implied term] the consequences would contradict what a reasonable person would understand the contract to mean.”

“Officious Bystander” Test

“The requirement that the implied term must “go without saying” is no more than another way of saying that, although the instrument does not expressly say so, that is what a reasonable person would understand it to mean. Any attempt to make more of this requirement runs the risk of diverting attention from the objectivity which informs the whole process of construction into speculation about what the actual parties to the contract or authors (or supposed authors) of the instrument would have thought about the proposed implication.”

Lord Hoffmann suggested that the criteria set out in BP Refinery was best regardedas a collection of different ways in which judges have tried to express the central idea that an implied term(s) must spell out what the contract actually means. , or that they have explained why they did not think they did so, not as a series of independent tests.

MARKS & SPENCER v BNP PARIBAS

On 2 December 2015, the Supreme Court handed down its judgment in Marks & Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd.

The case concerned a tenant’s break clause in a lease. It was common ground that the express terms of the lease did not compel the landlord to pay the tenant a sum of money upon the exercise of the break clause. The tenant contended that the lease in question should have contained a term to that effect.

Lord Neuberger referred to the ‘traditional’ authorities, describing them as “a clear, consistent and principled approach” to the implication of terms and simply added six ‘comments’ by way of explanatory gloss to Lord Simon’s summary in BP Refinery:

Reasonable people not actual parties

What matters is not the hypothetical answer of the actual parties, but that of notional reasonable people in the position of the parties at the original time.

The Fairness of a term of the fact that the parties would agree to it is insufficient

A term should not be implied into a commercial contract merely because it appears fair or because one considers that the parties would have agreed it if it had been suggested. Those are necessary but not sufficient grounds for including a term.

The requirement from BP Refinery V Hastings that implied terms must be reasonable and equitable adds nothing

If a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable.

Business efficacy and the “Officious Bystander” tests are not cumulative

Only one of these requirements needs to be satisfied (although if one is, the other is likely to be). Lord Neuberger agreed with Lord Hoffmann in Belize on this, although all other requirements in BP Refinery are cumulative.

It is important to correctly formulate the question asked by the “Officious Bystander”

Lord Neuberger cited Lewison in Interpretation of Contracts, 5th edition (2011) para 6.09 on this point. The book criticises questions which suggest only one answer and comments that a question may produce a different answer if put in a more neutral or easy to understand way.

Necessity for business efficacy involves a value judgment

The test is not one of “absolute necessity”, not least because the necessity is judged by reference to business efficacy. A more helpful way of putting the business efficacy requirement may be that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.

As such, Lord Neuberger stated that Lord Hoffmann’s comments in Belize should “henceforth be treated as a characteristically inspired discussion rather than authoritative guidance on the law of implied terms”.

CONCLUSION

The Supreme Court confirmed that, for a term to be implied, it must be necessary for business efficacy, or be so obvious, it goes without saying.

This is an important judgment, which provides welcome guidance on the questions generated by Belize, questions which have been misinterpreted as diluting these requirements. Going forwards the courts should consider Lord Neuberger’s explanatory comments on the traditional tests when deciding whether to imply a term into a contract or not.

Doing Business in Dubai

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LIMITED LIABILITY COMPANY

The LLC is the most popular onshore structure throughout the UAE.

51% of the share capital must be held by a UAE national or a company wholly owned by UAE nationals.

Although not officially sanctioned by law, common practice for foreigners setting up LLCs is to enter into side agreements altering profit and loss splits – deviations of a ratio of in favour of the foreign interest of up to 80/20 in Dubai and 90/10 in Abu Dhabi are common.

Advantage: a separate legal entity and not a branch of the foreign parent company

Disadvantage: unless the foreign interest is adequately protected by a side agreement, there is a loss of control

Consider synergies in picking a partner.

UAE BRANCH OF A FOREIGN COMPANY

A branch is limited to engaging in those activities undertaken by the parent company.

Branch operations must have a service agent who is a UAE National or is a company wholly owned by UAE Nationals.

Role of service agent is to assist the branch office with liaising with UAE governmental departments, such as obtaining licences, permits and visas.

The service agent is paid an annual fee and does not have any proprietary rights in the branch or any of its assets.

Advantage: the establishment process is convenient and avoids the partnership aspect of the LLC.

Disadvantage: the financial exposure to the parent company, the potential difficulties in terminating the service agency and the agency fees can be quite high.

FREE ZONE ENTITY

Free zones are territories within the UAE which have regulations that are designed to boost international business through providing 100% ownership to expatriates and single window administrative convenience.

Each free zone is governed by its own laws and regulations although federal laws such as the UAE Commercial Companies Law apply in certain free zones.

With some exceptions, the laws of and regulations of free zones prohibit free zone companies from conducting economic activities in the UAE outside the free zone.

It is possible to set a free zone company as:

  • a branch of a foreign company;
  • a free zone establishment which is a new business entity with a sole owner; and
  • a free zone company which is a new business entity owned by more than 1 shareholder and has limited liability status.

There are more than 20 operating free zones in Dubai and six6 in Abu Dhabi.

REMARKS

From our experience in the setup of our Middle East offices, there are three important lessons to be noted:

  • Get capable on-shore assistance both in planning and implementing your entry plan.
  • The business process in the UAE and in Europe/North America has parallels and some major differences but neither is distinctively easier or more difficult than the other. The key is having good advice in planning and implementing entry into each market.

Lastly, we reiterate our mantra:

  • Persistence.
  • Patience.
  • Presence.
  • Politeness.

DIFC Authorised Firm – Regulated by the Dubai Financial Services Authority

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Dubai Financial Services Authority (DFSA) is the independent financial services regulator in the Dubai International Financial Centre.

Amongst other Financial Services, an Authorised Firm can undertake the following Financial Services regulated by the DFSA:

  • Managing Assets (category 3C): managing on a discretionary basis assets belonging to another Person if the assets include any Investment or rights under a contract of Long-Term Insurance, not being a contract of reinsurance.
  • Managing a Collective Investment Fund (category 3C): being legally accountable to the Unitholders in the Fund for the management of the property held for or within a Fund under the Fund’s Constitution; and establishing, managing or otherwise operating or winding up a Collective Investment Fund.
  • Arranging Credit or Deals in Investments (category 4): principal or agent, buying, selling, subscribing for or underwriting an Investment; or making arrangements for another Person, whether as principal or agent, to borrow money by way of a Credit Facility.
  • Advising on Financial Products or Credit (category 4): in his capacity as an investor or potential investor, or in his capacity as agent for an investor or a potential investor on the merits of his buying, selling, holding, subscribing for or underwriting a particular financial product (whether as principal or agent); or in his capacity as a borrower or potential borrower or as agent for a borrower or potential borrower on the merits of his entering into a particular Credit Facility.

    If the Authorised Firm would invest in other entities as Principal or Agent, it may require authorisation under Categories 2 and 3A:

  • Dealing in Investments as Principal (category 2 or 3A depending on the type of investments).
  • Dealing as Agent (category 3A).

The Autumn Statement and your Business

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CORPORATE BORROWING

THE POLICY: Credit Data Sharing

Osborne promises to create greater competition in the lending market to make borrowing easier for small to medium-sized businesses.

Details

Under new legislation, regulations will impose a duty on designated banks to provide specified information about their small to medium-sized corporate customers to designated Credit Reference Agencies. These Credit Reference Agencies will then be under a duty to provide such information to other, smaller lenders who may be able to offer rates that are more competitive.

Note

Small to medium-sized businesses will be able to seek loans from a broader range of lenders, on potentially better terms.

ENTERPRISE ZONES

THE POLICY: Creation of New Enterprise Zones

Osborne promises to create 26 new enterprise zones.

Details

The good news continues in the form of the expansion of the Government’s Enterprise Zones in which businesses can utilise up to 100% business rate discount worth up to £275,000 per business over a five-year period.

Note

The Enterprise Zones offer access to numerous benefits for growing businesses and are helping to attract more foreign investment into the country, creating jobs and long term, sustainable businesses throughout England.

ENTREPRENEURS’ RELIEF

THE POLICY: Unaltered

Osborne promises not to alter Entrepreneurs’ Relief. This represents a huge potential saving to outgoing business investors.

Details

The Financial Times predicted that Entrepreneurs’ Relief was vulnerable to reform in the Autumn Statement but their fears were unfounded… for the moment.

With benefits of Entrepreneurs’ Relief, worth £3bn a year by the latest estimates, mostly accruing to just a few thousand business owners, it is an available relief that can save investors in small to medium-sized businesses a great deal of money.

Note

Tax professionals are making the case that this is not the end of Osbourne’s cutting of tax relief and warn Entrepreneurs’ Relief may be next on the chopping block. Seeking continuing advice on this issue will be important to capitalise on this relief while it is still available.

SMALL BUSINESS RATE RELIEF

THE POLICY: 12-Month Extension

12-month extension to the doubling of small business rate relief in England.

Details

No change from the previous period.

Note

This is welcome news for start-ups and small businesses throughout the country providing useful discounts to growing businesses.

BUY-TO-LET LANDLORDS

THE POLICY: Increase Stamp Duty Land Tax (SDLT)

Osborne promises to cut down on buy-to-let landlords to allow for greater opportunities for families to enter the property market.

Details

From 1 April 2016, an extra 3% will apply to the current SDLT rate on any additional residential property bought for over £40,000.

Therefore, the following SDLT rates will apply to such acquisitions:
£40,001 – £125,000 3%
£125,001 – £250,000 5%
£250,001 – £925,000 8%
£925,001 – £1.5m 13%
£1.5m + 15%

Purchasers will be obliged to opt in by declaring that the property will not be their primary residence.

Note

The increased rates will not apply to corporate or fund purchasers making significant investments in residential property. A government consultation will consider whether the ownership of more than 15 residential properties is appropriate as a “significant investment” for these purposes.

Fulfilling your lease formalities

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The Court of Appeal decision in the case of Lankester & Son Ltd v Robert David Rennie and Anne Rennie reaffirms that tenants must ensure they follow all the appropriate legal formalities when assigning a lease, to ensure effective assignment of the lease and to release the outgoing tenant from its obligations under the lease.

In this particular case, the signed but undated transfer in respect of the assignment of the lease was not delivered in the legal sense and on the particular facts there was no estoppel or implied surrender of the lease. Therefore, the lease remained vested in the tenant who remained liable under the lease covenants. The original tenant in this case vacated the premises and allowed the new tenant into occupation without a formal assignment. The new tenant paid rent to the landlord for some time and then sought to vacate. The landlord asserted on the one hand that the new tenant was liable for the rent but on the other hand arguedthat the lease had not been properly assigned and the original tenant was liable for the rent.

The Court of Appeal held that there had been no transfer of legal title, as registration had not been effected and that the original tenant remained the tenant under the lease.

This case affirms the warning to outgoing tenants to ensure the completion of all legal formalities before allowing the assignee into occupation, helping to avoid nasty shocksin the future. Landlords also need to be careful, not to inadvertently find themselves estopped from denying an assignment has occurred.

What to do with returning squatters

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Landlords have been plagued by the removal of one set of squatters only to find that another set, or indeed the same ones, have returned shortly thereafter. This is particularly more so since the criminalisation of squatting in residential premises in 2012.

To remove squatters a landlord would need to obtain an order for possession in the local county court to the premises against “persons unknown” and the county court can enforce bailiffs.Transfer to the High Court can speed up a possession order.

What then happens if they return, as you can only enforce a writ of possession once?

A landlord does not need to go through the process again he can apply for a writ of restitution, which is effectively a writ in aid of another writ. The Court must give leave for the issue of the writ of restitution, even where the re-occupation is not by the same persons and potentially, as long as there is a sufficient link between the two events, after a period, the Court should grant the writ.

Doing Business in…

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What are the key recent developments affecting doing business in your jurisdiction?

Business in Pakistan is being affected by the following:

  • A deteriorating law and order situation.
  • A severe energy crisis.
  • Circular debt in the power sector.

However, for the first time in Pakistan’s history a democratic government completed its term in 2013 and the new elected government will complete two years in May 2015. This indicates an improvement in the political stability of the country which should encourage foreign direct investment in Pakistan.

For full insight, Download Page as PDF.

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