Code of Massachusetts Regulations › 425 CMR - STATE OFFICE OF MINORITY AND WOMEN BUSINESS ASSISTANCE (SOMBWA) › Title 425 CMR 2.00 - Certification › Section 2.02 - Definitions; Certification; Certification Criteria; Certification Service/Product Category and Description; Recertification and Certification Renewal; Duty to Cooperate and Requirements to Remain in Good Standing; SDO Appeal Board

Current through Register 1525, July 5, 2024
(1)
Definitions
. The
			 following terms shall have the meanings in
			 425
			 CMR 2.02(1) or, if such
			 terms have been assigned meanings in M.G.L. c. 7, § 58, the following are
			 in addition thereto:
Applicant
. For-profit business
				enterprise or non-profit organization that applies to become a Certified
				Entity.
Certification Categories
. Minority
				Business Enterprise (MBE), Minority Non-Profit Organization (MNPO), Women
				Business Enterprises (WBE), Women Non-Profit Organization (WNPO), Portuguese
				Business Enterprise (PBE), Veteran Business Enterprise (VBE), Veteran
				Non-Profit Organization (VNPO), Disability-Owned Business Enterprise (DOBE),
				Lesbian, Gay, Bisexual, and Transgender Business Enterprise (LGBTBE),
				Service-Disabled Veteran-Owned Business Enterprise (SDVOBE), and any other
				category as established by M.G.L. c. 7, § 58, other statute, or by
				executive order.
Certified Entity
. An Applicant
				certified by the SDO, or an SDO approved Third-Party Certifier, pursuant to
				425 CMR
				2.00 in one or more certification categories, as
				defined in
				425
				CMR 2.02(1) and in M.G.L.
				c. 7, § 58.
Controlled
. One or more eligible
				principals have the legal authority to make and in fact make, all major
				decisions of the applicant without being subject to any agreement or document
				restricting control, or the approval or veto of any other person, business
				enterprise, or organization which by virtue of its business relationship to the
				applicant may be in a position to influence eligible principal's decisions; and
				having dominant control in the conducting of all major aspects of the business.
				This includes:
(a) having dominant
			 control over management and daily operations;
(b) having, in the specific endeavors which
			 generate the applicant's revenues, the demonstrable background, all legally
			 required credentials, and the technical competence necessary to weigh all
			 advice given and to make independent and unilateral determinations relating to
			 the activities engaged in by the applicant, including key determinations
			 relating to the day-to-day work of employees and workforce involved
			 operationally and technically; although an eligible principal must have
			 managerial experience and/or expertise needed to run the business, he or she
			 need not possess a license (unless required by a state law or regulation that a
			 firm owner hold a required credential) to be found to control a company if he
			 or she can demonstrate that he or she has ultimate managerial and supervisory
			 control over those who possess the required license or technical expertise.
			 However, where a critical license is held only by a non-eligible key employee
			 or person having an equity interest in the applicant firm, the non-eligible
			 person may be found to control the firm;
(c) having a thorough knowledge of the
			 financial structure, policies and affairs of the applicant;
(d) having dominant control of the financial
			 affairs and accounts of the applicant;
(e) having dominant control over the hiring
			 and firing of employees, including key employees, as well as any other
			 personnel and workforce decisions of the applicant;
(f) having dominant control over the
			 solicitation and negotiation of contracts, marketing, estimating, and the
			 offering and acceptance or rejection of bids;
(g) having dominant control over the purchase
			 of goods, equipment, business inventory and services needed in the day-to-day
			 operation of the applicant; and
(h)
			 having dominant control over the applicant's governing body, if any, as
			 described below:
1.
Corporations
: one or more eligible principal(s) of the
			 same certification category must hold the highest officer position and either
			 individually or collectively possess control over the Board of
			 Directors.
2.
Partnerships, Limited Liability Corporations (LLCs), and Limited
			 Liability Partnerships (LLPs)
: one or more eligible principal(s)
			 of the same certification category must serve as general partner(s), managing
			 member(s) or managing partner(s) as applicable, and possess control over all
			 partnership, LLC, or LLP decisions.
3.
Sole
			 Proprietorships
: ultimate operational control must vest in an
			 eligible principal whose name appears on firm documentation.
4. For non-profit organizations, depending on
			 structure, one or more eligible principal(s) must either individually or
			 collectively hold the highest officer position in the firm
			 (
e.g
., chief executive officer or director) and eligible
			 principal(s), of the same certification category as the highest officer
			 position holder, must possess ultimate individual or collective control over
			 the organization's governing body and/or Board of Directors.
(i) In addition, the following
			 factors must be considered in determining dominant control:
1. The eligible principal(s) shall not be
			 found lacking dominant control solely on the basis of the terms of a
			 franchise/license agreement that relate to standardized quality, advertising or
			 accounting format, as long as the franchiser or licenser is independent from
			 the franchisee or licensee.
2. The
			 eligible principal(s) shall not be found lacking dominant control solely on the
			 basis of his or her outside employment. However, if it can be shown that
			 outside employment actually interferes with the individual's ability to
			 ultimately either individually or collectively control the applicant on a
			 full-time basis, the applicant may not be certified.
3. The eligible principal(s) shall not be
			 found lacking dominant control solely on the basis of her or his level of
			 remuneration which may be lower than that of some other participants in the
			 firm. Differences in remuneration will be considered in the context of the
			 duties of the persons involved, the firm's policy and practice concerning
			 reinvestment of income, and any other explanations.
4. The eligible principal(s) shall not be
			 found having dominant control if the applicant fails the test for independence
			 as defined in
			 425
			 CMR 2.02.
5. Where appropriate, dominant control shall
			 be considered in the context of normal industry practices.
Credentials
. Documentary evidence of
				an eligible principal's lawful authority; commonly in the form of letters,
				licenses or certificates which on their face indicate the legal authority and
				capacity of the bearer.
Eligible Person
. An adult permanent
				resident of the United States who is a minority, veteran, person of Portuguese
				origin, LGBT individual, person with a disability, and/or a woman.
Eligible Principal
. Eligible person
				represented by the applicant to be an owner of the business enterprise or in
				control of a non-profit organization. Assets held in trust will be examined on
				a case by case basis to ensure that at least 51% of the trust's
				beneficiary(ies) is (are), either individually or collectively, held by
				eligible person(s) of the same certification category, and that the operational
				control of the applicant by eligible principal(s) is not unduly restricted by
				(an) ineligible trustee(s) or beneficiaries.
Free from Conversion Rights
. Neither
				the applicant nor the eligible principal(s) is (are) subject to any right,
				agreement, option, scheme or document that creates or is representative of any
				right, which, if exercised, would result in diluting the ownership of the
				eligible principal(s) in the applicant below 51% or cause the applicant to not
				be independent or controlled by one or more eligible principals or eligible
				persons.
Independent
.
(a) That the applicant is not dependent upon,
			 affiliated with, or influenced by, legally or in practice, any other person,
			 business enterprise or organization in connection with any key elements of its
			 day-to-day or long-term affairs, including contracts, sales, operations,
			 technical affairs, equipment, facilities, supplies, employees, workforce,
			 consultants, subcontracts, leases, financing, income, payroll, bookkeeping,
			 goodwill, policies or management; and
(b) That the applicant does not rely on or
			 regularly utilize to perform work it contracts to perform any employee or
			 workforce who, while performing work for the applicant, is in the course of
			 employment with or under the direct control of a person, business enterprise or
			 organization other than the applicant, with the exception of temporary office
			 personnel working in the normal course of the applicant's activity(ies);
			 and
(c) The applicant does not rely
			 on or regularly utilize to perform work it contracts to perform any management
			 or supervisory personnel other than those persons it directly employs and
			 controls.
(d) An applicant shall
			 not be considered independent if it presents insufficient evidence of having
			 the capability or capacity to perform, with its own workforce, equipment,
			 facilities or other functional assets the work it contracts to
			 perform.
(e) The temporary
			 employment or direct control by another person, business enterprise or
			 organization of an applicant's employee(s) or workforce does not by itself
			 constitute a lack of independence if the applicant is a temporary employment
			 service and the temporary employment or control of the employee(s) or workforce
			 occurs in the normal source of the applicant's business.
(f) Any of the following conditions creates a
			 rebuttable presumption that the applicant is not independent:
1. one or more eligible principals is
			 currently an employee of a non-eligible person owned or controlled business
			 enterprise or organization which has a direct or indirect financial or
			 controlling interest in, or influence on, the applicant; or
2. one or more of the ownership, governing
			 body members, officers, management officials, key employees or supervisory
			 personnel of the applicant are substantially the same as in a non-eligible
			 person owned or controlled business enterprise or organization which either has
			 a direct or indirect financial or controlling interest in, or influence on the
			 applicant, or is in the same or similar industry of the applicant; or
3. the applicant is a subsidiary or affiliate
			 of a non-eligible person owned or controlled business enterprise or
			 organization; or
4. one or more
			 eligible principals, or the applicant, is a former employee, employer,
			 affiliate or subsidiary of a person, business enterprise or organization that
			 is in the same or related industry as the applicant and which:
a. has a direct or indirect financial or
			 controlling interest in, or influence on, the applicant; or
b. assisted or assists one or more eligible
			 principals or the applicant to obtain or utilize any of the financial or
			 non-financial resources the applicant uses.
5. Notwithstanding the foregoing,
			 participation in a formal mentor-protégé program, joint venture,
			 or other program designed to assist diverse businesses shall not result in
			 automatic failure of the test for independence.
Minority
. A person who meets one or
				more of the following definitions:
(a)
Indian or Indigenous Person
. All persons having
			 origins in any of the indigenous peoples of Northern Canada, Greenland, Alaska,
			 and Eastern Siberia, and persons having origins in any of the indigenous
			 peoples of North America and who are recognized as an Indian by a tribe or
			 tribal organization.
(b)
Asian
. All persons having origins in any of the
			 original peoples of the Far East, Southeast Asia, the Indian sub-continent, or
			 the Pacific Islands, including, but not limited to China, Japan, Korea, Samoa,
			 India, and the Philippine Islands.
(c)
Black
. All
			 persons having origins in any of the Black racial groups of Africa including,
			 but not limited to, African-Americans, and all persons having origins of the
			 original peoples of the Cape Verdean Islands.
(d)
Hispanic
. All
			 persons having their origins in any of the peoples of Latin America, including
			 Mexico, Puerto Rico, Cuba, Central or South America, including Brazil, or the
			 Caribbean Islands.
(e)
Portuguese
. Portuguese persons shall only be included
			 in the definition of minority if specifically set forth in programs funded by
			 state transportation bond statutes, or other statutory authority, which include
			 such persons as eligible participants. Portuguese applicants are a separate
			 certification category from MBE.
Ongoing
.
(a) In all cases, that the applicant was not
			 formed, reformulated, changed or reorganized solely for the purpose of taking
			 advantage of a special program developed to assist businesses or
			 non-profit-organizations owned/controlled by eligible principal(s);
			 and
(b) If the applicant is a
			 business enterprise, it means being actively in business, and owning or leasing
			 the resources that are typical for a business enterprise in its industry, that
			 ensures applicant's ability to manufacture products or provide services in the
			 field of requested certification without heavily relying on resources of any
			 other person, business enterprise or organization, and having facilities that
			 are appropriate for conducting a business of its type at the present stage of
			 its development, and regularly and actively seeking contracts, orders, or sales
			 of the applicant's products or services; or
(c) If the applicant is a non-profit
			 organization, it means regularly and actively engaging in the non-profit
			 activities for which it was formed.
(d) Reorganization and/or ownership changes
			 that render a firm potentially eligible for SDO certification, which occurred
			 12 months prior to certification application submittal shall create a
			 rebuttable presumption that the firm was restructured solely to take advantage
			 of certification.
(e) No applicant
			 shall be certified if it is currently debarred by any state, local, or federal
			 governmental body.
(f) Applicant
			 must possess any and all licenses required by Massachusetts law or regulation
			 for the services/products it provides.
Out-of-state Applicant
. An applicant
				or entity whose principal place of business is other than Massachusetts.
Owned
.
(a)
1.
Corporation
: one or more eligible principals of the
			 same certification category(ies), either individually or collectively, have
			 ownership of 51% or more of each type and class of outstanding stock of the
			 corporation, including voting stock, and 51% or more of the aggregate of all
			 types and classes of outstanding stock of the corporation.
2.
Partnership, Limited Liability
			 Company (LLC)
: one or more eligible principals of the same
			 certification category(ies), either individually or collectively, have
			 ownership of 51% or more of the total partnership (LLC or joint venture)
			 interest, including all assets, benefits, distribution rights, tax credits,
			 deductions and postponements, and a commensurate share of the partnership's
			 LLC's or joint venture's liabilities and obligations.
3.
Massachusetts Business Trust
			 (established under M.G.L. c. 182)
: one or more eligible principals
			 have ownership of 51% or more of transferable certifications of participation
			 and serve as trustee(s).
4.
Sole Proprietorship
: the eligible principal has sole
			 ownership of all of the proprietorship assets, and being personally and solely
			 at risk and obligated for all of its losses and liabilities.
5.
All Businesses
.
			 The eligible principal(s) must have the right to and actually receive the level
			 and kind of profit and benefits and enjoy customary incidents of ownership, if
			 any, that are commensurate with the level and kind of ownership reflected in
			 the ownership documents; the eligible principal(s) must be at risk for, and
			 actually incur, losses, if any, of the business enterprise in the manner and to
			 the extent which is commensurate with the level and kind of ownership reflected
			 in the ownership documents; the eligible principal's(s') ownership must be
			 continuing; and the certification criteria must be met in substance as well as
			 form. Profits, dividends, salaries, debt repayments, retained earnings and
			 distributions of any kind (including distributions upon liquidation) are
			 included among all of the indicators which may be considered.
(b) The firm's ownership by
			 eligible principals must be real, actual, genuine and meaningful, going beyond
			 "paper" ownership as reflected in ownership documents. The eligible owners must
			 enjoy the customary incidents of ownership, and share in the risks and profits
			 commensurate with their ownership interests, as demonstrated by the substance,
			 not merely the form.
(c) The
			 contribution of capital or expertise by the eligible persons to acquire their
			 ownership interests must be real and substantial. Debt instruments from
			 financial institutions or other organizations that lend funds in the normal
			 course of their business do not of themselves render a firm ineligible, even if
			 the debtor's ownership interest is security for the loan.
(d) In addition to a significant financial
			 investment in the firm including, but not limited to, capital, equipment,
			 contribution of property, space, patents, or copyrights, eligible principal's
			 irreplaceable expertise may be credited towards required contribution only if
			 it is outstanding quality, in the areas critical to the firm's operations and
			 indispensable to the firm's potential success. Said expertise will be
			 considered in light of the totality of all relevant circumstances and counted
			 only if accompanied by a significant financial stake and clearly documented by
			 the firm's records.
(e)
			 Contribution of capital shall not be regarded as lacking "real" and
			 "substantial" attributes solely because an eligible person acquired his or her
			 ownership interest as a result of a gift, or transfer without adequate
			 consideration unless there is a reason to believe that transfer in question
			 took place for the sole purpose of certification eligibility.
A particular thorough scrutiny to the ownership and control of
				the firm in light of totality of the circumstances shall be conducted to ensure
				that it is owned and controlled, in substance as well as in form, by an
				eligible person as opposed to a non-eligible transferor. In addition, where an
				ineligible transferor (whether or not an immediate family member) remains
				involved with the firm in any capacity, the eligible principal(s) now owning
				the firm must demonstrate that the transfer of ownership and/or control to the
				eligible person was made for reasons other than obtaining certification.
Third-Party Certifiers
. An entity,
				other than the SDO, which certifies business enterprises or non-profit
				organizations in one or more certification categories, or a specific industry,
				and is approved by the SDO to be utilized to process an applicant's inclusion
				into the SDO's listing of certified entities. The SDO's relationship with
				approved Third-Party Certifiers, and its approved utilization of their
				certification process, which shall be consistent with
				425
				CMR 2.02, shall be at the sole discretion of
				the SDO.
Veteran
. A person who is a veteran, as
				defined in M.G.L. c. 4, § 7.