Can a Woman Who Lacks Experience Control a Small Business Concern?

Blog
May 13, 2019

The Small Business Administration (SBA) recently said “no,” overturning a set-aside award to a woman-owned small construction business. The firm in question is 51% owned by two women, who serve as the president and vice president. The women did not have prior construction experience and had not previously held similar positions in other industries. However, their respective husbands, who serve as the firm’s secretary and treasurer, have extensive experience in the construction industry. The company job descriptions and organization chart indicated that the women could control the firm, at least to some extent, but that was not acceptable to the SBA.

To qualify as a woman-owned small business, the management and daily business operations of the concern must be owned and controlled by one or more women. The issue in this particular case was the definition of control. The SBA based its decision on CFR 127.202 (b), which states that in order to show control, a woman “must hold the highest officer position in the concern and must have managerial experience of the extent and complexity needed to run the concern.” The SBA ruled that the women owners of this firm did not have sufficient experience in the construction industry or business in general to realistically control a construction company. The SBA also noted that the women’s husbands did have construction experience or possess the required licenses, and they were heavily involved in managing the day-to-day operations.

The lesson is the use of paperwork (i.e. job titles and descriptions, organization charts, etc.) is insufficient to demonstrate a woman’s control of a concern, when the woman does not have the experience required to manage the firm. This will certainly continue to be a hot-button issue, as in this case, when males who do have sufficient experience have equity in the firm and stand to benefit from set-aside awards designed to help women entrepreneurs

For more information on SBA, women-owned small businesses, or other relevant matters, contact Tom Marcinko at 301.231.7630.