![]() Size Appeal of Eagle Pharmaceuticals, Inc., SBA No. Negative control can exist if a minority shareholder can block ordinary actions essential to operating the company.When your operating agreement requires approval from a third party, there is a chance that negative control and affiliation can be found.See also, SBA 8a Mentor Protege Joint Venture Rules 13 CFR 124.513 & 13 CFR 121.103. Size Appeal of Q Integrated Companies, LLC, SBA No. SIZ-5086, at 7 (2009).)ĭespite the above, OHA has also indicated that a single indication of negative control is not, by itself, sufficient to find affiliation. See S ize Appeal of DooleyMack Government Contracting, LLC, SBA No. Receivership and (vi) admitting that the firm is insolvent. solely with actions that include: (i) disposal of a company’s assets (ii) receiving capital contributions from a member (iii) admitting new members (iv) materially altering the rights of existing shareholders (v) filing for bankruptcy or Negative control generally would not arise under 13 CFR 121.103(a)(3). However, SBA OHA has also found that “amending or changing aspects of a business’s certification of incorporation or bylaws, issuing additional shares of capital stock, and entering a substantially different line of business” are extraordinary events for which negative control does not give rise Oftentimes, mistakes are detected when reading SBA operating agreement contracts for purposes of affiliation, partnership agreements or some level of business contracts. What is a negative control? When the SBA reviews a company for what is negative control under its regulations, negative control typically refers to whether an individual or company has the power to affirmatively take action to amend, alter or modify company documents or business operations. SBA Negative Control Definition Under 13 CFR 121.103(a)(3)? However, waiting until the small business size protest is filed can be too late. The negative control definition and positive control legal analysis can be confusing to small businesses. When making size determinations and affiliation under the negative control definition for small businesses, the SBA not only looks at finding actual control over the protested business but also whether a non-disadvantaged person or entity has the ability to control the company.Ĭompanies should make sure that their operating agreements do not leave them exposed and ultimately have millions of government contract revenues taken away due to a violation of SBA business control rules under 13 CFR 121.103. Does Your SBA Operating Agreement Comply With the Rules Under 13 CFR 121.103? If Not, You Can Lose Your Contract.
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