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How to invest: Court of Appeal gives important guidance to entrepreneurs


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One of the requirements for Tier 1 (Entrepreneur) migrants extending their visas in the UK is to show they have invested £200,000 that they previously showed was available for investment in their initial applications.

The important case of R (Sajjad) v SSHD [2019] EWCA Civ 720 is about the ways in which entrepreneur migrants can do this. It is a textbook example of the lack of flexibility and confusion inherent in the Points Based System, and required reading for migrants in this route considering how to invest their funds.

Sajjad’s Grill and Restaurant

Mr Sajjad had arrived in the UK in 2011 as a Tier 1 (Entrepreneur) migrant and set up his business, which latterly traded as Sajjad’s Grill and Restaurant.

It was common ground in the case that Mr Sajjad had transferred almost £500,000 from himself personally to his UK company.

However, as the Home Office took the view he had not done this in one of the ways prescribed by the Immigration Rules, an extension application was refused on 27 May 2015.

After a lot of legal wrangling, almost four years later, Mr Sajjad ended up in the Court of Appeal where his appeal against refusal of permission to apply for judicial review was dismissed last week.

Investment requirements

The Immigration Rules are very specific about how the required £200,000 investment must be shown.

The fact that – as the Home Office accepted – almost £500,000 had been transferred into the company by Mr Sajjad was not enough.

One of the ways in which investment can be shown is by way of a director’s loan. In a letter from his accountants submitted with the application, the accountant had referred to the funds transferred to the company by Mr Sajjad as just that.

But the Immigration Rules require that a director’s loan agreement be supplied containing certain information about the nature of the loan, and confirming that it was unsecured and subordinated in favour of third-party creditors. No such agreement was supplied and the extension application was refused.

A Third Way?

On the narrow point, the case is uncontroversial. The Home Office (not unreasonably in the context of the strict nature of the Points Based System rules) took the funds transferred by Mr Sajjad to be a director’s loan based on the letter from the accountant. In order to rely on this form of investment he should have supplied a director’s loan agreement, which he did not.

This is harsh on the individual in the case, and is yet another example of the spirit (if not the letter) of the Rules being met, but where no flexibility is shown to the refused applicant on the receiving end.

But the really interesting (and worrying) part about this case is that the Secretary of State argued that there were only two permissible methods of investing funds for Tier 1 (Entrepreneur) migrants. Counsel suggested

that the effect of paragraphs 46 and 46-SD is that an applicant for leave to remain under the PBS, who seeks an award of points on the basis of an investment in a UK business, must establish that the investment has taken one of only two permissible forms: investment by way of a director’s loan, or investment by way of purchase of share capital. 

Paragraph 27; emphasis added

This submission directly contradicts the Tier 1 (Entrepreneur) guidance, which states as follows:

Acceptable investment

This page tells you the types of investment you can accept for the award of points.

Direct cash investment

To make sure the money is used by the business, the applicant must provide the accounts of that business for assessment. These accounts must show the investment in money made directly by the applicant, in their own name.

Share capital

If the applicant has invested by way of share capital, the business accounts must show the shareholders, the amount and value of the shares (on the date of purchase) in the applicant’s name as it appears on their application. …

Director’s loan

This only applies to migrants who become directors of a company. A director’s loan to the company will be considered for the award of points as long as it is unsecured and subordinated in favour of third-party creditors. …

I count three methods of investment there.

Although the court does entertain the possibility of investment via a gift, the “direct cash investment” method is not mentioned in the judgment. Presumably the Court of Appeal did not have this guidance before it.

And although the bench did not express a conclusive view on the submissions made by the Secretary of State (that there were only two conceivable methods of investment, not three), it made fairly strong noises of agreement with the Home Office position as expressed in submissions (see Lord Justice Holroyde at paragraph 34, and Males LJ at 40).

So, amazingly, in the face of contrary submissions by counsel for the Secretary of State, it was left to Mr Sajjad to attempt to justify and explain to the Court of Appeal the policy basis for, and existence of, a third method of investment permitted by the Home Office, as set out in its own guidance.  

Direct cash investment

In the case Mr Sajjad argued that his investment

took the form of his crediting the company’s bank account and then using the funds to develop the business … but … that there was no “director’s loan” for the purposes of Annex A, paragraph 46-SD

Paragraph 24

He made the point that, on the face of the rules

Where the investment takes the form of a director’s loan, or a purchase of shares, then paragraph 46-SD requires specified documents to be provided; but other forms of investment, such as the appellant made, do not impose any comparable obligation beyond what is contained in sub-paragraphs 46-SD(a)(ii) and (b).


And looking at the Home Office guidance set out above, this appears to be the position.

However, as Mr Sajjad had submitted evidence which suggested his investment was a loan, not direct cash investment, and had not produced a loan agreement, the Court of Appeal did not feel the need to make a finding on this point (which would have been helpful).

Indeed, this appears to be the first senior judicial consideration of methods of investment in Tier 1 (Entrepreneur) extension applications, provisions which have been in operation for over ten years now.

Practitioners (and judges) occasionally complain about the deluge of decisions from the higher courts, making it more difficult to understand the law on any given point. But sometimes judicial scrutiny is the sunlight the Immigration Rules need to identify potential contradictions, as here.

Better safe than sorry

Following this judgment, and pending any clarification from the Home Office, it would probably be advisable for any Tier 1 (Entrepreneur) migrants who are considering injection of funds by way of ‘direct cash investment’ as permitted by the relevant guidance to instead invest by way of director’s loan or share issue.

The case provides yet further evidence of the complexity of the Immigration Rules in general, and typifies the issues with the Tier 1 (Entrepreneur) route, which has had a 50% refusal rate going back to 2013.

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Nick Nason

Nick Nason

Nick is a lawyer at Edgewater Legal, simplifying immigration law for individuals and businesses.