Proving the Companies Are Related

The relationship between the two entities is where intracompany petitions most often fail, and the failure is usually evidential rather than substantive. The companies genuinely are connected; what is missing is a document establishing that the connection is one of the four the regulation recognizes.

The four relationships

A parent is a firm, corporation or other legal entity that has subsidiaries. A branch is an operating division or office of the same organization housed in a different location. A subsidiary is defined by ownership and control, in four alternative formulations. An affiliate is defined by common ownership and control, again in defined forms.

The requirement that the organization meet exactly one of these is a discipline rather than a technicality. It forces the petitioner to characterize the structure precisely, and a characterization that shifts between filings, or that describes the entities as affiliated in a general sense, tends to indicate that none of the four has been established.

Branch deserves a separate note because it is the least understood of the four. A branch is not a related company; it is the same legal entity operating from another location. Where a business trades overseas through a registered branch rather than a separate incorporated subsidiary, the relationship is established by the fact that there is only one entity, and the evidence is the registration rather than a share register.

The subsidiary tests

A subsidiary is an entity of which a parent owns, directly or indirectly, more than half and controls; or owns, directly or indirectly, half and controls; or owns fifty percent of a fifty-fifty joint venture and has equal control and veto power over it; or owns, directly or indirectly, less than half but in fact controls it.

Ownership and control are treated as separate elements throughout. Majority ownership without control does not satisfy the first formulation, which requires both. The joint venture formulation is the one most often misread: equal ownership alone is not enough, and the petitioner must show both equal control and veto power, which are established from the constitutional documents rather than from the shareholding.

Indirect ownership is expressly contemplated in each formulation, which allows a chain of intermediate holding companies. What the chain must do is carry both the ownership and the control through to the entity in question, and each link in it needs its own documentation. A chain established only in a summary chart is a chain with no evidence behind any of its links.

The affiliate tests

An affiliate is one of two subsidiaries both owned and controlled by the same parent or individual, or one of two legal entities owned and controlled by the same group of individuals, each individual owning and controlling approximately the same share or proportion of each entity. The second formulation is the one that reaches closely held businesses, and its condition is precise: approximately the same proportions in both entities.

The requirement of common ownership and control also means that ownership alone is insufficient here as elsewhere. Two entities held by the same people who exercise no control over one of them are not affiliates, and the control element is proved from governance documents rather than from the holdings.

The first affiliate limb, covering two subsidiaries of the same parent or individual, is generally the easier one to evidence, because it depends on a single upstream holder whose position is documented once. Where a structure can be characterized under either limb, the first is usually the better choice for that reason alone.

That condition defeats many family and founder structures. Two companies owned by the same three people in different proportions are not affiliates under this limb, however closely they operate together. The proportions have to correspond, and the correspondence is proved from the registers of both entities rather than from a description of the arrangement.

The evidence that actually establishes it

The evidence is corporate rather than descriptive. Certificates of incorporation and constitutional documents for each entity. Share registers or their local equivalent, showing holdings at the relevant dates. Stock certificates and any transfer records. Shareholder or joint venture agreements where control is asserted without a majority.

Audited accounts or consolidated statements identifying the group are useful because they are prepared for another purpose and by someone outside the immigration process. Board minutes recording appointments carry the same advantage where control rests on board composition rather than on shareholding, and they establish when the arrangement began as well as that it exists.

An organizational chart is useful as a summary and useless as proof. Every line on it should be traceable to one of the documents above, and where a line cannot be traced, that is the line an adjudicator will ask about. Foreign-language documents need translations, and the translation should be complete rather than selective, since a partial translation of a shareholders' agreement invites a request for the rest.

The requirement continues

Both the relationship and the business activity are continuing conditions. The organization must be doing business as an employer in the United States and in at least one other country for the duration of the stay, which means a structure that satisfies the definition at filing can cease to satisfy it afterward. A sale, a restructuring, a dilution or the closure of the overseas operation each has that potential.

Organizations rarely consider immigration consequences in a transaction timetable, and the effect on employees already transferred is discovered afterward. Where a structure is being changed, or where an existing structure is unclear, a qualifying relationship counsel can map the entities against the four definitions before a petition is prepared or a deal is signed.

The elements the relationship supports are set out in transferring a manager between related companies, and the alternative basis where the role is not managerial is examined in specialized knowledge and why it is refused so often. The same definitions appear again in the residence category described in the permanent route for a transferred manager, which is why a structure documented once tends to serve a group for years.