What are the Requirements?
Certification regulations (425 CMR §2.00 et seq.) require that the entity must:
- Be both owned and controlled by the same eligible principal(s); and
- Be free of any conversion rights; and
- Be independent; and
- Be ongoing.
Common Characteristics Include:
- That the same eligible principal(s) own at least 51 percent of the company, and
- That they are members of one of the following ethnic/racial groups (Black, Hispanic, Cape Verdean, Asian, Native American, Eskimo-Aleut) or are female, and
- That the eligible principal(s) exert managerial and corporate control of the company, and
- That the eligible principal(s) exert day-to-day operational control of the company and can show
background, experience, mandatory licensing and technical knowledge of the industry necessary to supervise the operations of the business, and
- That the company is actively conducting business at the time of application, and
- That the company is independent.
WHO SHOULD APPLY FOR MBE OR WBE STATUS?
Companies owned and controlled by U.S. Citizens or lawful permanent residents of the United States Eligible persons are those adults:
Whose cultural heritage is African, American Indian, Asian, Hispanic (Central/South American or Caribbean), Eskimo or Aleut or of the original peoples of the Cape Verde Islands. They will be applying as Minority Business Enterprises (MBEs) AND/OR
Who are female. They will be applying as Women Business Enterprises (WBE's).
Eligible Principals Who are Both Female and Members of the Cultural Groups Above - If all other above criteria are met and you are a female whose ethnicity is African, American Indian, Asian, Hispanic, Eskimo or Aleut or of the original peoples of the Cape Verde Islands. They may apply as MBEs and WBEs.
Proof of Ethnicity or Gender Can include ONE of the Following Items: passport picture photo page, birth certificate, naturalization papers, Indian tribal roll or registration certificate.
WHAT IS AN ONGOING BUSINESS?
A company that is actively engaged in business activity from an established place of business (including home-based businesses) utilizing equipment, finances and other resources that are independently owned or leased.
An Ongoing Business Means: That the company is currently and actively in business, able to demonstrate that the revenue stream has begun or is about to begin, that substantial marketing activity is taking place, that the company owns and leases the resources that are typical for a business in the industry, and that the business facility is appropriate for the conduct of business of its type at the present stage of development of the company. It also means that the business has not been established or reorganized for the sole purpose of taking advantage of special programs which assist minority, women or minority-women businesses.
Note: Prospective business activity normally will not be sufficient to meet the ongoing business requirement.
Examples of documentation of ongoing business requirements include but are not limited to:
- Income (profit and loss) Statement for the last fiscal year (or for those months in business if the firm is less than one (1) year old)
- Balance Sheet for the last fiscal year(or for those months in business if the firm is less than one (1) year old)
- Executed contracts or invoices from three (3) recent customers or clients
- Copies of five (5) Cancelled Checks written for business purposes
- Marketing materials, proposals, bid documents and customer contact letter or logs (ONLY include if you cannot supply three (3) recent invoices or contracts).
Appropriately Furnished Business Space
Examples of documentation of ongoing business requirements include but are not limited to:
- Provide a brief description of the tools and/or equipment used in the conduct of the business; AND
- Provide supporting documentation for the business space as follows.
- Leased Space: Attach a copy of a written lease.
- Tenants at Will: If no written lease exists, submit three (3) recent rent checks.
- In Home Business: Attach a narrative stating where the business is located and/or tools are stored within the home.
- Owner(s) of A Commercial Building Used for Business Purposes: Submit a copy of a property tax bill.
WHAT IS OWNERSHIP?
Generally, eligible principals are those owners of the company, who have assumed a dominant financial risk in the business commensurate with ownership interest. The eligible principals bear the financial risk and receive financial benefits commensurate with their ownership interest in the firm.
Ownership means: The company can demonstrate that minority and/or women principals own at least 51 percent of the company, in substance as well as in form. Where there are multiple principals including eligible and non-eligible persons, the ownership interest of the eligible principals must add up to at least 51 percent.
Note: Ownership also means that the company is structured so that the minority or women principals are entitled to receive, and actually receive, income and any other benefits from the company in proportion to their ownership interest, consistent with common industry or business practices. These include but are not limited to salary, profit, fees (e.g., consultant fees), fringe benefits, other distribution of revenue, or retained earnings.
Examples of documentation of ownership include but are not limited to:
- Sole Proprietors - a signed copy of the most recent entire federal form 1040 Tax Form or extension (if applicable).
Note: For start-up companies that are not yet required to file taxes, a copy of the business certificate (also known as a DBA certificate) filed with the city or town where the business is located may be used to document ownership. If your city or town does not require a business certificate, then the eligible principal's notarized signature on the application documents ownership.
- Partnerships - a copy of the partnership agreement in its entirety, including but not limited to share of ownership, roles and responsibilities, capitalization or contributions, and exit agreement and a signed copy of the most recent partnership federal tax return or extension (if applicable).
- Limited Liability Partnerships (LLP) or Limited Liability Companies (LLC) a copy of the operating agreement in its entirety, including but not limited to share of ownership, roles and responsibilities, capitalization or contributions, and exit agreement and a signed copy of the most recent federal business taxes or extension (if applicable).
- Corporations - Should produce copies of articles of organization, by-laws, front and back copies of current and (where applicable) cancelled stock certificates, stock transfer ledger, corporate meeting minutes recording action with regard to ownership, annual report, if applicable and most recent federal corporate tax return or extension (if applicable).
WHAT IS CONTROL?
A company whose eligible principal is also the full-time, day-to-day manger of the company, making financial, managerial and operational decisions of the highest order, and who is CEO/President of the company if a corporation and who, along with other eligible principals, dominates the Board of Directors.
Financial control means: that whatever financial action is taken in the business, from signing checks to obligating the company resources through loan agreements, it is the eligible principal who is the final authority and decision-maker in name as well as in practice, without conditions of any sort attached to his/her actions.
Examples of documentation of financial control include but are not limited to:
- bank signature cards and corporation resolutions OR a letter from the bank stating who can sign on company accounts
- Loan agreements and verification of ownership of collateral
- Indemnification(s) for bond(s) and verification of underlying assets
- Third party agreements affecting control
- Sections of the by-laws affecting control
Corporate control means: that the eligible principal generally holds the highest office in the corporation, typically CEO/President, and that eligible principals hold numerical majority on the Board of Directors.
Examples of documentation of corporate control include but are not limited to:
- Corporate Documents such as articles of organization, annual report, minutes of corporate meetings, by-laws and amendments to by-laws
Operational/managerial control means: That the eligible principal has the capacity to direct the operations of the company through his/her own professional or technical knowledge, training, experience and credentials independent of the knowledge, skills, abilities and credentials of a non-eligible principal or employee. In a company where field operations take place, the eligible principal has the capacity to direct the field operations. In an industry where professional or technical licensing is required to be held in the principal's name, the eligible principal must hold that license in his/her name.
The eligible principal is the final authority and decision-maker when it comes to financial decisions, estimating and bidding, contract negotiation and execution, field production/operations management, sales & marketing, office management, hiring and firing employees, the purchase of major pieces of equipment and acquiring and allocating the company's resources.
An eligible principal may delegate certain daily responsibilities to other ineligible person(s) provided (1) the delegation is revocable; and (2) the eligible principal has sufficient general competence to oversee the daily operations of the firm and to supervise such ineligible individuals.
The eligible principal must demonstrate dominant control over the firm's daily operations. Without full-time participation of the eligible principal in the day-to-day activity of the business, it would be difficult to demonstrate "control" within the meaning of the regulations.
Examples of documentation of operational/managerial expertise include but are not limited to:
- resumes of all principals and key employees
- Copies of licenses and/or registrations held by principals and key employees
- Any other evidence of managerial or professional expertise in the requested area of certification
What Constitutes an Independent MBE or WBE?
A company that is not dependent upon, affiliated with, or influenced by any ineligible person, business enterprise or organization, legally or in practice, in connection with any key elements of its day-to-day or long-term affairs. Independence will be evaluated on a case by case basis.
To Be Independent means that the company:
- Uses its own employees and workforce in the performance of its work
- Uses its own supervisory and managerial staff in the performance of its work
- Has the capability and capacity to perform with its own workforce, equipment, facilities or other functional assets the work it contracts to perform
- Does not unduly rely on another firm for its policies, management, technical affairs, goodwill, financing, contracts, sub-contract, income, payroll, bookkeeping, sales, leases, facilities, equipment, supplies, or consultants
Examples of a lack of independence:
- The applicant is a subsidiary or affiliate of a non-MBE or non-WBE firm
- An eligible principal of the applicant is an employee of non-MBE or non-WBE firm which has a direct or indirect financial or controlling interest in the applicant firm
- The applicant firm has the same directors, officers, management, supervisors or key employees as a non-MBE or non-WBE firm with a direct or indirect financial or controlling interest in the company
- The applicant firm shares resources with a non-MBE or non-WBE firm
The above list is intended for illustration purposes only. For a more concise legal definition, please consult 425 CMR 2.00 et seq., M.G.L. c. 23A § 40 and M.G.L. c. 7, § 40N insert links