On January 29, 2018, the SBA issued proposed changes to its SDVOSB regulations. Proposed SBA SDVOSB Regulations (1/29/18) This comes as the VA is about to dump its own SDVOSB regulations and follow the SBA’s. The proposed regulations provide greater guidance on some of the issues that have haunted the contracting community, resulting in loss of verification and protests.
For example, the proposed SBA SDVOSB regulations prohibit super-majority voting requirements, except in extraordinary circumstances. Specifically, under a company’s bylaws or operating agreement, a super majority vote can be required in the following extraordinary situations:
- Add a new equity shareholder
- Dissolve the company
- Sell the company
- Merge the company
- Declare the company bankrupt
Allowing all members to approve the above actions will provide a more favorable environment for outside investors to take partial ownership of an SDVOSB.
The proposed SBA SDVOSB regulations also define the term “unconditional ownership” to allow for conditions that follow normal commercial practices. This will allow, for example, the rights of first refusal to purchase a members’s or shareholder’s ownership interest if he or she decides to sell.
There are many other interesting provisions in the SBA’s proposed SDVOSB regulation changes. We will keep you posted when they become final.
