Under the Small Business Administration’s affiliation rules, a minority owner may “control” a company where the company’s governing documents impose supermajority voting requirements that require the minority owner’s consent for the company to make ordinary business decisions.

In a recent size appeal decision, the SBA Office of Hearings and Appeals (OHA) confirmed that supermajority voting requirements may establish control (and affiliation), even where the minority owner does not actually exercise its control.

OHA’s decision in Size Appeal of Potomac River Group, LLC, SBA No. SIZ-5689 (2015) involved a DoD solicitation for assistance in performing security interviews and polygraph examinations.  The solicitation was issued as a small business set-aide under NAICS code 561611 (Investigation Services).

After evaluating competitive proposals, the agency identified Potomac River Group, LLC as the apparent successful offeror.  An unsuccessful competitor subsequently filed a size protest challenging PRG’s small business eligibility.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/sba-affiliation-rules-beware-supermajority-voting-requirements