Supermajority Voting and SDVOSBs: Another One Bites the Dust

Unanimity and supermajority voting requirements are one of the most common ways for a service-disabled veteran-owned small business to find itself on the wrong end of an eligibility protest (or, in the case of the VA, a CVE verification denial). Case in point: the decision of the SBA Office of Hearings and Appeals in SDVOSB Appeal of Rush-Link One Joint Venture, SBA No. VET-228 (2012).

The Rush-Link case involved three problematic arrangements in the formation of a service-disabled veteran-owned small business and its joint venture with a non-SDVOSB firm, including a supermajority provision (the other two problems are discussed in separate posts). In Rush-Link, a service-disabled veteran owned 55% of the company. So far, so good.

However, the service-disabled veteran and the non-service-disabled veteran minority owners had executed a Shareholders’ Agreement, calling for all decisions of the shareholders to be decided by a 70% vote. Given this supermajority requirement, the service-disabled veteran was unable to control the company. The SBA sustained an eligibility protest, and SBA OHA agreed, declaring the joint venture ineligible to receive a SDVOSB set-aside contract.

The decision in the Rush-Link SDVOSB appeal is a good reminder that when it comes to SDVO small businesses, supermajority or unanimity provisions may cause the SBA or VA to determine that the service-disabled veteran does not control the company—and therefore, that the company is not an eligible SDVO small business.

Leave a Reply

Your email address will not be published. Required fields are marked *