Business Affiliation Rule (13 CFR 121.103) The following is subject to additional SBA guidance and clarification of the new PPP SBA 7(a) loan program. (i) Venture capital operating companies, as defined in the U.S. Department of Labor regulations found at 29 CFR 2510.3-101(d); (ii) Employee benefit or pension plans established and maintained by the Federal government or any state, or their political subdivisions, or any agency or instrumentality thereof, for the benefit of employees; (iii) Employee benefit or pension plans within the meaning of the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. (3) If a concern's voting stock is widely held and no single block of stock is large as compared with all other stock holdings, the concern's Board of Directors and CEO or President will be deemed to have the power to control the concern in the absence of evidence to the contrary. In addition, the eligibility criteria set forth in 15 U.S.C. What is the SBA's OStensible COntractor Rule? To protect your small business status, you have to start by thinking about affiliation. 1 That confusion focused on whether to conduct “affiliation” analysis under Section in Title 13 CFR §121.301 (“Section 301(f)”) or §121.103 – the right answer is Section 301(f)). In January, XY is found to be the apparent successful offeror for Solicitation 3. A joint venture is an association of individuals and/or concerns with interests in any degree or proportion consorting to engage in and carry out no more than three specific or limited-purpose business ventures for joint profit over a two year period, for which purpose they combine their efforts, property, money, skill, or knowledge, but not on a continuing or permanent basis for conducting business generally. XY is eligible for the contract award because compliance with the three awards in two years rule is determined as of the date of the initial offer including price, XY submitted its offer prior to December 19, year 3, and XY had not received three contract awards prior to its offer on December 15. They would only escape affiliate if they met the statutory exemption for SBA affiliation rules. in­ creased by 25% whenever the. 2 Keep in mind that the CARES Act itself repealed February 2020 guidance on affiliation in connection with other SBA programs. The specific affiliation rule for SBA's financial assistance programs is set forth in 13 CFR § 121.301. What is the affiliation rule and how does it affect size standards? Do the SBA affiliation rules prohibit a portfolio company of a private equity fund from being eligible for a PPP loan? Thus, Firm B accounts for over 70% of Firm A's receipts. A tax-exempt nonprofit organization described in section 501(c)(3) of the Internal Revenue Code (IRC), a tax-exempt @����8�5�#k�ȚF9ľ���q��v��͆r���a#w�]q����L�5�[y�YؖK�"��= ��������m���������O�n�A������j�&D�#n%��֒�B4�-֍n+�(C�T�Ԓ���u4����z�K�r);\��A.U��ћ�_eiޡ����FH_�,�Z�matP�Pqv5�������h� (i) Affiliation based on franchise and license agreements. Affiliation may arise, however, through other means, such as common ownership, common management or excessive restrictions upon the sale of the franchise interest. applicant agrees to use. In either case, after contract performance is complete, the 8(a) partner to the joint venture must submit a report to its servicing SBA district office explaining how the applicable performance of work requirements were met for the contract. 121.301. Below are the four affiliation tests retained by the Updated Affiliation Guidance: 1. This does not mean to imply that one or more representatives of a holding company or parent entity cannot also be involved in preparing an offer. 9805, or wholly-owned entities of Indian Tribes, ANCs, NHOs, or CDCs are not considered affiliates of such entities. of. On August 6, year 2, XY receives a second contract. This means that the size of Company Z is determined by adding its employees to those of Companies X and Y. “ [T]he SBA’s affiliation rules, including those set forth in 13 CFR part 121, do not apply to the relationship of any church, convention or association of churches, or other faith-based organization or entity to any other person, group, organization, or entity that is based on a sincere religious teaching or belief or otherwise constitutes a part of the exercise of religion.” SBA may also determine that the relationship between a prime contractor and its subcontractor is a joint venture, and that affiliation between the two exists, pursuant to paragraph (h)(5) of this section. 80a-1, et seq. Government Contracts for Small Businesses & Limitations on Subcontracting . Labor publication ‘‘Area Trends. 1141j), are not considered affiliated with the cooperative by virtue of their membership in the cooperative. This means that a specific joint venture entity generally may not be awarded more than three contracts over a two year period, starting from the date of the award of the first contract, without the partners to the joint venture being deemed affiliated for all purposes. Contract 1 is with Firm B and is valued at $900,000 and Contract 2 is with Firm C and is valued at $200,000. (7) For SBA's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, the bases for affiliation are set forth in § 121.702. 13 CFR § 121.301(f)(l). On December 15, year 3, XY submits an offer for Solicitation 3. (B) Contract administration services include both services that could be considered “common administrative services” under the exception to affiliation and those that could not. h�Ė[o�:�� How does SBA determine affiliation. Negative control includes, but is not limited to, instances where a minority shareholder has the ability, under the concern's charter, by-laws, or shareholder's agreement, to prevent a quorum or otherwise block action by the board of directors or shareholders. �Đ�;1"�n��*W�66��\?���%��2�oi^k& X�o���?\���N�$�ʝ�۹�z��+�*���l�h@p��P;UO����tScNv �A��� ���C���Br�/�v�n������ܕ۴���i���jPa�g�dnU���Y=�iYm��ݻl|Lfl�5+#SJ��v�����"�i�����Ū\gņ�gE���}�U��zL+��� � ��紱~Ē��r�WߵMj��^��z!��%"�,y�qˤ�;;����a��J A�fe! The terms “church” and “convention or association of churches” have the same meaning that they have in 26 U.S.C. (i) This presumption may be rebutted by a showing that despite the contractual relations with another concern, the concern at issue is not solely dependent on that other concern, such as where the concern has been in business for a short amount of time and has only been able to secure a limited number of contracts. [T]he detailed affiliation standards contained in section 121.103 currently do not apply to PPP borrowers, because section 121.103 (a) (8) provides that applicants in SBA’s Business Loan … Similarly, a protégé firm is not affiliated with its mentor solely because the protégé firm receives assistance from the mentor under a federal mentor-protégé program where an exception to affiliation is specifically authorized by statute or by SBA under the procedures set forth in § 121.903. Under SBA’s affiliation rules, 13 CFR 121.301(f)(1) and (3), Company Y and Company Z are affiliates of one another because they are under the common control of Company X, which wholly owns both companies. A small business concern as defined in section 3 of the Small Business Act (15 U.S.C. 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