Current through Register Vol. 63, No. 9, September 1, 2024
(1) In
determining whether the socially disadvantaged individual(s) in a firm owns the
firm, the COBID must consider all the facts in record viewed as a
whole.
(2) One or more socially
disadvantaged individuals must own at least 51% of the business. COBID will
apply the standards a criteria for ownership as set out in
49 CFR §
26.69 (e-CFR 2015 Edition).
(a) In the case of a corporation, such
individual(s) must own at least 51 percent of each class of voting stock
outstanding and 51 percent of the aggregate of all stock outstanding.
(b) In the case of a partnership, the
socially disadvantaged individual(s) must own 51 percent of each class of
partnership interest. The ownership must also reflect in the firm's partnership
agreement.
(3) In the
case of a limited liability company, the socially disadvantaged individual(s)
must own at least 51 percent of each class of member interest.
(4) If a firm is owned equally (i.e., 50/50)
by a combination of socially or economically disadvantaged individuals, the
COBID will determine whether a firm is certified as a MBE, WBE, or SDV based on
which individual possesses overall management and control of the firm. Evidence
in support of management and control may include one or more of the following:
(a) Professional licensing as generally
required by the industry (e.g., engineer, architect, plumber, electrician,
landscape architect, etc.)
(b)
Control of day-to-day operations of the firm
(c) Position held in the firm
(d) Ability to hire and fire staff
(5) The business must be
controlled by one or more socially disadvantaged individual(s). COBID will
apply the standards and criteria set out in
49 CFR §
26.71 (e-CFR 2015 Edition).
(6) One or more of the socially disadvantaged
individual(s) must have made a substantial contribution of capital to the
business, which is commensurate with his or her ownership interest.
(a) The COBID may consider differences in
compensation between the potentially certified owner(s) and other participants
in the firm to determine whether to certify a firm. Such consideration shall
encompass the duties of the persons involved, normal industry practices, the
firm's policy, and practice concerning reinvestment of income, and any other
explanations for the differences proffered by the firm.
(b) A contribution is not a promise to
contribute capital, an unsecured note payable to the firm or to an owner who is
not a socially disadvantaged individual or mere participation in a firm's
activities as an employee. Debt instruments from financial institutions or
other organizations that lend funds in the normal course of their business do
not render a firm ineligible, even if the debtor's ownership interest is
security for the loan.
(7) The socially disadvantaged individual's
ownership in the firm must be real, substantial, and continuing, going beyond
pro forma ownership and reflected as such in all business documents. The
socially disadvantaged owner(s) must enjoy the customary incidents of
ownership, and share the risks and profits commensurate with their ownership
interest, as demonstrated by the substance, not merely the form, or
arrangements.
(8) The socially and
economically disadvantaged individuals must directly hold all securities that
constitute ownership of a firm.
(a) Except as
provided in this paragraph, the COBID does not consider securities or assets
held in trust, or by any guardian for a minor, as owned or held by the socially
disadvantaged persons in determining the ownership of a firm.
(b) The COBID does recognize securities or
assets held in trust by a socially disadvantaged individual for purposes of
determining ownership of the firm, if:
(A) The
beneficial owner of securities or assets held in trust and the trustee are both
socially disadvantaged individuals; or
(B) The beneficial owner of a trust is a
socially disadvantaged individual who, rather than the trustee, exercises
effective control over the management, policymaking, and daily operational
activities of the firm. The applicant may count assets held in a revocable
living trust only in the situation where he or she is the sole grantor,
beneficiary, and trustee.
(9) If the applicant is relying on his or her
expertise for certification, he or she must have a significant financial
investment in the firm.
(10) The
COBID will consider the following requirements as they apply to situations in
which the applicant relies on his or her expertise as a contribution to acquire
ownership. The owner's expertise must be:
(a)
In a specialized field;
(b) Of
outstanding quality;
(c) In areas
critical to the firm's operations;
(d) Indispensable to the firm's potential
success;
(e) Specific to the type
of work the firm performs; and
(f)
The records of the firm must reflect the applicant's expertise. These records
must clearly show the contribution of expertise and its value to the firm. The
applicant may quantify his or her expertise in years of experience, education,
and accomplishments related to the types of services the firm offers.
(11) When an applicant receives
majority stock ownership or control of a firm from a non-qualifying applicant
within two years prior to submitting an application and the non-qualifying
applicant remains involved in the firm as a stockholder, officer, director, or
key employee the COBID will presume that the applicant does not control the
firm. The applicant may rebut this presumption by showing that he or she has
independent management experience necessary to control the operation of the
firm and indeed is participating in the management of the firm.
(12) Assets held by a socially disadvantaged
individual(s) as result of a final property settlement; court order in a
divorce or, legal separation from a non-socially disadvantaged individual;
through inheritance; or following the death of the former owner, are assets of
the socially disadvantaged individual. The terms and conditions of legal
documentation governing that transaction (i.e. divorce settlement, legal will,
etc.) support the transfer of ownership to them.
(13) The COBID will not consider as evidence
of ownership interest or assets in a firm obtained by a socially disadvantaged
individual through gift or transfer from a non-socially disadvantaged
individual unless there is evidence to support the transfer of interest and
assets occurred for reasons other than obtaining certification.
(14) To overcome this presumption and permit
the COBID to count interests or assets, the socially disadvantaged individual
must demonstrate by clear and convincing evidence that:
(a) The gift or transfer to the socially
disadvantaged individual was made for reasons other than obtaining
certification as a MBE, WBE, and/or SDV; and
(b) The socially disadvantaged individual
actually controls the management, policy, and operations of the firm,
notwithstanding the continuing participation of a non-socially disadvantaged
individual who provided the gift or transfer.
(15) The COBID will closely scrutinize such
transfers when the socially disadvantage individual and non-socially
disadvantaged individual are:
(a) Directly
affiliated and involved in the same firm for which the socially disadvantaged
individual is seeking certification;
(b) Involved in the same or a similar line of
business; or
(c) Engaged in an
ongoing business relationship related to the types of services in which the
socially disadvantaged individual is seeking certification.
(16) In situations in which
marital assets form a basis for ownership of a firm, the COBID considers the
following:
(a) When marital assets (other than
the assets of the business in question), held jointly or as community property
by both spouses, are used to acquire the ownership interest asserted by one
spouse, the COBID must deem the ownership interest in the firm to have been
acquired by that spouse with his or her own individual resources. In doing so,
the other spouse must irrevocably renounce and transfer all rights in the
ownership interest of the applicant in the manner sanctioned by the laws of the
state in which either spouse or the firm is domiciled. The COBID does not count
a greater portion of joint or community property assets toward ownership than
state law would recognize as belonging to the socially disadvantaged owner of
the applicant firm.
(b) The COBID
will require a fully executed Non-participation Statement renouncing the
non-qualifying spouse or domestic partner's rights in the jointly owned or
community asset used to acquire an ownership interest in the firm.
(17) The COBID must not regard a
contribution of capital as failing to be real and substantial, or find a firm
ineligible, solely because:
(a) A socially
disadvantaged individual acquired his or her ownership interest as the result
of a gift or transfer without adequate consideration, other than the types set
forth in paragraph (12) of this section;
(b) There is a provision for the co-signature
of a spouse who is not a socially disadvantaged individual on financing
agreements, contracts for the purchase or sale of real or personal property,
bank signature cards, or other documents; or
(c) An applicant receives ownership of the
firm in question or its assets for adequate consideration from a spouse who is
not a socially disadvantaged individual to a spouse who is such an
individual.
Statutory/Other Authority: ORS
285A.070, ORS
285A.075(1)(a)
& ORS 200.025(2)
Statutes/Other Implemented: ORS
200.005 & ORS
200.055
