As we’ve discussed, the SBA will soon take the reins over from VA to run the certification process for Veteran-Owned Small Businesses (VOSBs) and Service-Disabled, Veteran-Owned Small Businesses (SDVOSBs). Self-certification for SDVOSBs will go away on December 31, 2023, so be sure to get your SDVOSB ownership and control documents up to snuff in order to stay compliant with the SDVOSB rules. One of those rules concerns unconditional ownership by the veteran. A recent federal court case sheds some additional light on that topic, as explored in this post…
In particular, OHA noted that, for an SDVOSB, there can be no “impediment to the exercise of the full range of ownership rights” for the veteran owner and the owner “must immediately have an absolute right to do anything they want with their ownership interest or stock, whenever they want.” This language comes from an older OHA decision, Wexford Group International, Inc., SBA No. SDV-105 (2006). Because the E&L veteran owner had restrictions on transfer of ownership, the ownership was not unconditional and not compliant under the SDVOSB rules…
Upon remand, OHA explained its reasoning more thoroughly, to the court’s satisfaction. OHA noted: “The definition of [SDVOSB] unconditional ownership was thus taken from SBA’s 8(a) BD program.” This means that SDVOSB and 8(a) Programs use the same rules on unconditional ownership. In addition, the only time there can be limitations on ownership is when the ownership interest is used as collateral, such as in connection with a standard commercial loan. OHA addressed the updated rule, and explained why it was consistent with existing SBA interpretations of unconditional ownership–and the court agreed… Read the full article here.
