SBA Affiliation Rules: Owner of One Share (of 120) Controlled Company

The owner of a 1/120th interest was presumed to control a company under the SBA’s affiliation rules.

You read that right.  In a recent size appeal decision, the SBA Office of Hearings and Appeals held that where 120 owners each held one share of stock in a company, all 120 were presumed to control the company for size purposes.

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The SBA’s “Common Investments” Affiliation Rule: A SBA OHA Primer

“Common investments” affiliation under the SBA affiliation rules can occur when the SBA believes that two individuals’ common investments in multiple companies will cause the individuals in question to act with a common purpose.

A recent SBA OHA size appeal decision shows how the common investments rule can work in practice–in this case, resulting in the business in question being deemed affiliated with several other companies.

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HUBZone Fraud: Contractors Agree To $6.25 Million Settlement

Two Kentucky-based government contractors and their owners have agreed to pay $6.25 million to settle HUBZone fraud claims, according to a U.S. Department of Justice press release.

The costly settlement puts an end to a saga involving DOJ claims of a vacant “principal” office, undisclosed affiliation, and fraudulent statements made to the SBA and and the U.S. Army.

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SBA OHA Confirms Broad Affiliation Exception for Tribal Companies

The SBA Office of Hearings and Appeals has held that the SBA Area Office did not err by refusing to find affiliation between a tribally-owned company and its sister companies.

SBA OHA’s recent decision in Size Appeal of Bosco Contractors, Inc., SBA No. SIZ-5412 (2012), follows on the heels of Size Appeal of Roundhouse PBN, LLC, SBA No. SIZ-5383 (2012), in which SBA OHA found that the SBA had erred by adopting a too-narrow view of the tribal exception from affiliation.

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SBA OHA: Tribal Companies Entitled to Broad Affiliation Exceptions

Indian tribes, their holding companies, and companies owned by those holding companies are entitled to broad exceptions from the ordinary SBA affiliation rules, according to a recent SBA Office of Hearings and Appeals size appeal decision.

SBA OHA’s decision in Size Appeal of Roundhouse PBN, LLC, SBA No. SIZ-5383 (2012), holds that the SBA cannot use non-applicable affiliation rules to circumvent the regulatory exception from affiliation between tribal companies.  In its ruling, SBA OHA also sidestepped an interesting tribal size question: did Congress truly intend for some tribal companies to be “small” for 8(a) program purposes, but “other than small” for all other government contracts?

As you can probably tell, the Roundhouse PBN case is not your run-of-the-mill SBA OHA size appeal decision, meaning a slightly longer-than-normal blog post is in order.  Let’s dive right in.

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