123:2-16-03 Certification of business structure.

(A) EOD may require the following criteria of a business seeking certification as an EDGE business enterprise:

(1) If the applying business is a corporation:

(a) At least fifty-one per cent of the board of directors and at least fifty-one per cent of the principal executive officers and the fifty-one per cent owner(s) are economically and socially disadvantaged as defined in this chapter, and that these persons have ultimate control over the management and day-to-day operations of the business, including but not limited to finances, management decisions, and policies.

(b) Economically and socially disadvantaged owner(s) own at least fifty-one per cent of each class of corporate stock.

(2) If the applying business is a partnership:

(a) The fifty-one per cent economically and socially disadvantaged owners have ultimate control over the management and day-to-day operations of the business, including but not limited to finances, management decisions, policies, and that such owners have an interest in the capital, assets, profits and losses of the business proportionate to their percentage of ownership.

(b) At least fifty-one per cent of each class of partnership interest is owned by partners who are economically and socially disadvantaged as defined in this chapter. Such ownership must be reflected in the business's partnership agreement.

(c) For a partnership to be controlled by socially and economically disadvantaged person(s), any non-disadvantaged partners must not have the power to contractually bind the partnership or subject the partnership to contract or tort liability.

(3) If the applying business is a sole proprietorship:

(a) The sole proprietor is an economically and socially disadvantaged person as defined in this chapter.

(b) The sole proprietor has ultimate control over the management and day-to-day operations of the business, including but not limited to finances, management decisions, and policies.

(c) The sole proprietor has the one hundred per cent interest in the capital, assets, profits and losses of the business.

(4) If the applying business is an association:

(a) The association is organized pursuant to Chapter 1785. of the Revised Code; and

(b) At least fifty-one per cent of the members of the association are economically and socially disadvantaged as defined in this chapter, and that these persons have ultimate day-to-day control over the management including but not limited to finances, management decisions, and policies, and that such owners have an interest in the capital, assets, profits and losses of the business proportionate to their percentage of ownership.

(5) If the applying business is a limited liability company:

(a) The company is organized pursuant to Chapter 1705. of the Revised Code.

(b) At least fifty-one per cent of the members of the limited liability company are economically and socially disadvantaged individuals as defined in this chapter.

(c) At least fifty-one per cent of the contributions of capital to the limited liability company are provided by economically and socially disadvantaged members of the company.

(d) The economically and socially disadvantaged members of the limited liability company have ultimate control over the management and day-to-day operations of the company, including, but not limited to, finances, management decisions, policies, and that such members have an interest in the capital, assets, profits and losses of the business proportionate to their percentage of ownership.

(B) EOD shall consider the following criteria (but not limited to) in determining control, independence, and ownership of a business applying for EDGE certification:

(1) The economically and socially disadvantaged owner(s) maintains and demonstrates authority to direct the day-to-day management and policies of the business.

(2) The economically and socially disadvantaged owner(s) holds the highest officer position(s) in the business (e.g., chief executive officer or president).

(3) Differences in remuneration between the socially and economically disadvantaged person, other participants, and the former owner of the business (when the non-disadvantaged individual remains involved with the business).

(4) Where a business was formerly owned and/or controlled by a non-disadvantaged person (whether or not an immediate family member), or ownership and/or control were transferred to an economically and socially disadvantaged person, in either case, the non-disadvantaged person remains involved with the business in any capacity, the economically and socially disadvantaged person now owning the business must demonstrate, by clear and convincing evidence, that the transfer of ownership and/or control to the economically and socially disadvantaged person was made for reasons other than obtaining certification as an EDGE business.

(5) The socially and economically disadvantaged owner(s) must possess the power to direct or cause the direction of the management and policies of the business and to make day-to-day as well as long-term decisions on matters of management, policy and operations.

(6) Only an independent business may be certified as an EDGE business. An independent business is one that the viability of which does not depend on its sole relationship with another business.

(7) The economically and socially disadvantaged owner(s) shall have in their name, the requisite licenses associated with the nature of the business or have required licenses officially assigned to the business.

(8) The economically and socially disadvantaged owner(s) have ownership of the securities of the business.

(9) The socially and economically disadvantaged owner(s) must have an overall understanding of, and managerial and technical competence and experience directly related to, the type of business in which the business is engaged and the business's operations. The socially and economically disadvantaged owners must have the ability to intelligently and critically evaluate information presented by other participants in the business's activities and to use this information to make independent decisions concerning the business's daily operations, management, and policymaking. Generally, expertise limited to office management, administration, or bookkeeping functions unrelated to the principal business activities of the business is insufficient to demonstrate control.

(10) To be viewed as controlling a business, a socially and economically disadvantaged owner(s) cannot engage in other business interests that conflict with the management of the business or prevent the individual from devoting sufficient time and attention to the affairs of the business to control its activities. For example, absentee ownership of a business and part-time work in a full-time business are not viewed as constituting control. However, an individual could be viewed as controlling a part-time business that operates only on evenings and/or weekends, if the individual controls it at all times it is operating.

(11) In determining whether a business is controlled by its socially and economically disadvantaged owner(s), EOD will consider whether the business owns equipment necessary to perform its work. However, a business is not controlled by socially and economically disadvantaged owner(s) solely because the business leases, rather than owns, such equipment, where leasing equipment is a normal industry practice and the lease does not involve a relationship with another party that compromises the independence of the business.

(12) Businesses acquired as gifts, without sufficient consideration, will be closely examined to assure such transactions meet the requirements of the EDGE business development program.

(13) Among the factors that shall be considered by the state equal employment opportunity coordinator in evaluating a non-economically and non-socially disadvantaged person's or business's influence over socially and economically disadvantaged owners or businesses are:

(a) Has the non-socially and non-economically disadvantaged person(s) employed the owner(s) of the applicant for any period of time during the three years prior to the date of application by the applicant for EDGE business enterprise status;

(b) Is the non-socially and non-economically disadvantaged person(s) affiliated with another business in the same or similar type of business as the applicant;

(c) Does the non-socially and non-economically disadvantaged person or business exercise final authority over any aspect of the day-to-day operations of the applicant;

(d) Does the non-socially and non-economically disadvantaged person or business control the applicant directly, or indirectly restrict the economic growth of the business;

(e) Does the non-socially and non-economically disadvantaged person or business receive compensation from the economically and socially disadvantaged owner or business for services as a consultant, director, officer or employee rendered to the applicant and the relative value of such compensation.

(f) Does the non-socially and non-economically disadvantaged person or business exercise actual ultimate control or have the authority to control any aspects of the day-to-day operations, finances, or the management decisions and management policies of the applicant business. The existence of control or the authority to exercise control shall be determined by the facts of each application.

(g) Does the non-socially and non-economically disadvantaged person or business hold a financial interest greater than forty-nine per cent of the value of the company or has supplied the financing or loan(s) to purchase the business in amounts greater than the socially and economically disadvantaged owner(s).

(h) Any other criteria EOD deems relevant that demonstrates control, independence, and ownership of the business.

(C) Failure to provide requested information in a timely manner may delay the processing of the certification application.

(D) Except as otherwise required by law, all financial statements and records submitted by an applicant to EOD shall not be released to the public unless such documents are determined to be public records pursuant to section 149.43 of the Revised Code.

(E) Upon determining that the economically and socially disadvantaged owner and business have met the criteria for certification in the EDGE program, as outlined in this section, the equal employment opportunity coordinator of the department of administrative services may certify the business.

(F) If the state equal employment opportunity coordinator of the department of administrative services determines that the business or economically and socially disadvantaged business owner does not meet the criteria set forth in this chapter, EOD shall notify the applicant of its decision by mail. The notification shall include the applicant's appeal rights as set forth in Chapter 119. of the Revised Code.

(G) EOD shall have the right to conduct on-site inspections at any location of a business seeking certification. EOD shall give appropriate and adequate notice before an on-site inspection.

(H) The state equal employment opportunity coordinator of the department of administrative services may determine the length of the EDGE certification issued pursuant to this chapter; however, no certification shall exceed two years from the date of certification, provided that the EDGE business enterprise remains in compliance and is not decertified pursuant to rule 123:2-16-06 of the Administrative Code.

(I) A business removed for non-disciplinary reasons or graduated from the program may re-enter the program after one year, provided that it meets all eligibility requirements.

(J) The maximum amount of time a business or business owner may participate in the EDGE public contracts assistance program as a certified business is ten years.

Effective: 2/1/2016
Five Year Review (FYR) Dates: 11/05/2015 and 11/20/2020
Promulgated Under: 119.03
Statutory Authority: R.C. 123.152
Rule Amplifies: R.C. 123.152
Prior Effective Dates: 11/26/2004