VOSB Claimed Amended Bylaws Gave Veteran Control of Business. OHA Didn’t See It that Way.

The SBA denied a company’s Veteran-Owned Small Business application, finding a veteran did not control the company. The company appealed, arguing it had amended bylaws to give complete control to the qualifying veteran. OHA was unpersuaded because the bylaws still contained a two-thirds majority requirement that the qualifying veteran did not hold.

• Denial – SBA denied the appellant’s VOSB application finding the appellant’s management and daily business operations were not controlled by one or more veterans. The appellant’s bylaws defined a quorum of the board of directors as the presence of a majority of directors, and all business transacted by the board of directors required the affirmative vote of a majority of directors.
• Appeal – Appellant appealed stating that it amended its bylaw to explicitly declare that the qualifying veteran controlled the appellant’s management and daily operations. OHA found that the appellant failed to show that SBA committed an error. The governing documents showed that a non-veteran owner could prevent the establishment of a quorum and block actions made by the qualifying veteran. The bylaws required a vote by a two-thirds majority of shareholders to remove a director. While the qualifying veteran held the majority of stock, he did not hold two-thirds. The amendment did not remove or invalidate the two-thirds requirement. The appeal was denied.

President of MaxIt Corporation, Earle E. Baruch, III, appeared for the appellant.

— Case summary by Joshua Lim, Assistant Editor