If you are a business owner, when is the last time, if ever, that you read your corporate bylaws or your LLC’s operating agreement?
Do you understand how they affect your control of the business?
Understanding how your corporate documents affect an owner’s ability to control a business is vitally important, and even more so when applying for Disadvantaged Business Enterprise (DBE), Minority Business Enterprise (MBE) or Women’s Business Enterprise (WBE) certification. All three of these certifications require that the woman or minority owner legally controls the company.
You may be surprised how many owners think that they own a controlling share of their company, when, in fact, their corporate documents hamper their control. Some do not realize this until they are going through the certification process. Perhaps the company drafted its corporate documents itself or used an attorney that wasn’t familiar with the certification requirements. In any event, a review by a knowledgeable attorney prior to submission of the certification application could have helped reach a different outcome.
Where we most often see issues hampering the control of an owner are in quorum and voting requirements. T his is highlighted by several recent decisions by the U.S. Department of Transportation, denying DBE certification based on issues with the companies’ corporate documents.