The Upper Tribunal (UT), although expressing some sympathy for the applicant, had to agree with the Secretary of State’s decision that the director’s loan provided did not meet the requirements in paragraph 45(d)(iii) of Appendix A of the Immigration Rules.
Background:
The applicant, a national of Kenya, was granted entry clearance as a Tier 1 (entrepreneur) migrant in September 2016. The visa was originally until January 2020 but was extended until the 4th of March 2022. On the 3rd of March 2022, the applicant submitted an application for further leave to remain, although this was refused on the 6th of May 2022 because the director’s loan provided did not meet the criteria as specified in paragraph 4((d)(iii) of Appendix A of the Immigration Rules.
The applicant had relied on investment in the form of a director's loan to a company called Fametex Textile Recycling Ltd. in his applications. He entered into a director’s loan agreement with Fametex on 19 October 2016 for £220,000 for the 'purchase of assets and working capital'.
The respondent maintained the refusal to renew after an administrative review on the 5th of June 2023. The applicant appealed to the UT.
Decision:
The UT dismissed the application for judicial review. Judge Mandalia established that the “requirement in paragraph 45(d)(iii) of Appendix A to the Immigration Rules for specified evidence of investment in the form of a director's loan, imposes a requirement that the loan agreement itself sets out the four factors identified in the rule, including the requirement that the loan is unsecured and subordinated to other creditors' loans to the business.”
The UT found that the word ‘showing’ in paragraph 45(d)(iii) of Appendix A imposes a requirement that the “loan agreement sets out the four factors identified in the rule. That is; (i) the terms of the loan, (ii) any interest that is payable, (iii) the period of the loan, and (iv) that the loan is unsecured and subordinated to other creditors’ loans to the business.” The fourth criterion is a safeguard to ensure that creditors will have priority over the debt payable to the director. In this case, the loan agreement lacked sufficient clarity to establish that the loan was unsecured and subordinated to other creditors' loans, given the ambiguity in certain clauses and the absence of explicit statements on the matter.
The Judge also noted that the “applicant was provided an opportunity, prior to the respondent's decision of 6 May 2022 to provide evidence of a director's loan that meets the requirements of the rules but resubmitted the same document.”
Implications:
This decision highlights the need for any document provided to comply with the requirements of paragraph 45(d)(iii) of Appendix A. Any director’s loan must be unsecured and subordinated to other creditors' loans. The terms must be unambiguous and contain explicit statements on the matter.
This decision also demonstrates the importance of providing clarifications when requested. Had the applicant provided a different document when first asked in 2021, he would not have been confronted by the situation and subsequent refusal.
