§ 11-22 Eligibility Criteria.
RCNY § 11-22
The following standards will be used to determine whether a business enterprise is eligible for certification as an MBE and/or WBE.
(a)Nexus. In order to be eligible for certification as an MBE and/or WBE, a business enterprise must have a real and substantial business presence in the geographic market for the city of New York. An MBE and/ or WBE which meets one of the following conditions will be deemed to have a real and substantial business presence in the geographic market for the city of New York: (1) the business enterprise's principal office or place of business or headquarters is located within the City; or (2) the business enterprise maintains full-time employees in one or more of the business enterprise's offices within the City to conduct or solicit business in the City the majority of their working time; or (3) the business enterprise's principal office or place of business or headquarters is located within the geographic market of the City, and (i) has transacted business more than once in the City within the last three years, or (ii) has sought to transact business more than once in the City within the last three years; or (4) twenty-five percent (25%) of the business enterprise's annual gross receipts for the last three years were derived from transacting business in the City; or (5) the business enterprise's principal office or place of business or headquarters is not located within the geographic market of the City but the business enterprise has demonstrated two or more of the following indicia of a real and substantial presence in the market for the City of New York: (i) the business enterprise has maintained a bank account or engaged in other banking transactions in the City; (ii) the business enterprise, or at least one of its owners, possesses a license issued by an agency of the City to do business in the City; (iii) the business enterprise has transacted or sought to transact business in or with the City more than once in the past three years.
(b)Ownership. For the purposes of determining whether an applicant should be certified as an MBE and/or WBE, or whether such certification should be revoked, the following rules concerning ownership will be applied: (1) The equity interest of minority group member(s) and/or women owners must be proportionate to the contribution of the minority group member(s) and/or women owners; (2) A sole proprietorship must be owned by a minority group member and/or woman; (3) A partnership must demonstrate that minority group members and/or women have a fifty-one (51%) percent or greater share of the partnership; and (4) A corporation must have issued at least fifty-one (51%) percent of its issued and authorized voting and all other stock to minority group members and/or women shareholders. (b-1) (1) For the purposes of subdivision b of this section, the term "contribution" shall include: (i) contributions of money, property, equipment or relevant expertise to a business enterprise in furtherance of the legitimate business objectives of such business enterprises; and (ii) payments to other persons or entities in consideration for an equity interest in a business enterprise.
(2)Notwithstanding any provision of this subdivision, the term "contribution" shall not include: (i) a payment to a person or entity in exchange for an equity interest in a business enterprise where such payment is made from the proceeds of a promissory note or loan for which the balance outstanding is over 50% of the total note or loan amount; (ii) the receipt of an equity interest as a gift; or (iii) payments from a bank account over which the minority and/or women owners cannot demonstrate control.
(c)Control. Determinations as to whether minority group members and/or women control the business enterprise will be made according to the following criteria: (1) Decisions pertaining to the operations of the business enterprise must be made by minority group members and/or women claiming ownership of that business enterprise. The following will be considered in determining whether the minority group members and/or women are making such decisions: (i) whether minority group members and/or women have experience and technical competence in the business enterprise seeking certification; (ii) whether minority group members and/or women demonstrate the working knowledge and ability needed to operate the business enterprise; and (iii) whether minority group members and/or women show that they devote time on an ongoing basis to the daily operation of the business enterprise.
(3)Minority group members and/or women must demonstrate control of negotiations, signature authority for payroll, leases, letters of credit, insurance bonds, banking services and contracts, and other business transactions through production of relevant documents.
(d)Additional eligibility provisions. The following provisions apply to all applicants seeking certification as an MBE and/or WBE: (1) Documentation may be required to substantiate the claim of membership in a minority group. This documentation may include, but is not limited to, birth certificates, foreign passports, naturalization papers, registration on Native American tribal rolls and nonresident visas; (2) Where the actual management of the business enterprise is contracted out to individuals other than minority group members and/or women, minority group members and/or women must demonstrate that they have the ultimate power to hire and fire these managers, that they exercise this power and make other substantial decisions which reflect control of the business enterprise; (3) Documentation of one (1) year's business activity will be required in order to provide sufficient information upon which certification can be reasonably made. The commissioner, in his or her discretion, may permit documentation for a lesser period; (4) Any business enterprise that satisfies the eligibility criteria as set forth in 66 RCNY § 11-22, is presumptively eligible for certification as an MBE and/or WBE under these rules; provided that the commissioner may decline to certify, or revoke the certification of, any business enterprise on the ground that there is not a firm basis for believing that there is a compelling state interest to justify certification of that business enterprise under these rules.
(e)Graduate MBE and/or WBE determinations. The division will, upon reviewing applications for certification and recertification, determine whether a business enterprise qualifies as a graduate MBE and/or WBE. The division will make such determinations in accordance with the following procedures: (1) In the event that the division determines a business enterprise seeking new certification as an MBE and/or WBE qualifies as a graduate MBE and/or WBE pursuant to 66 RCNY § 11-21, the division will provide a written notice of such determination to the applicant business enterprise stating the reason(s) for such determination and the procedures for challenging the graduate MBE and/or WBE determination.
(4)In the event that the division has determined a business enterprise to be a graduate MBE and/or WBE, and the business enterprise has not made a timely challenge to that determination, or has made such a challenge and the department has affirmed its determination, the business enterprise may not apply to have the designation lifted for at least two years from the date of the original determination notice. The division will lift the designation if the firm demonstrates that (i) it has not been awarded contracts by one or more agencies within the past three years where the total city funding from the expense and capital budgets for such contracts was equal to or greater than fifty million dollars; and (ii) it has been below the size standards established by the United States small business administration for its industry for a period of two years or more.
(f)Certification as both an MBE and a WBE. In order to be certified as both an MBE and a WBE, a business enterprise must show that the ownership standard described in subdivision b of this section and the control standard described in subdivision c of this section are met by women who are minority group members.
(g)Certification decision for firms held in trust.
(1)Notwithstanding any other provision of this subchapter, the Division may determine a business enterprise that does not meet all of the eligibility criteria set forth in subdivisions (b), (b-1), and (c) of this section is nevertheless eligible for certification as an MBE or WBE if the business enterprise previously met all the eligibility criteria set forth in subdivisions (b), (b-1), and (c) of this subdivision, regardless of whether such business enterprise previously sought or obtained certification during the time period in which such business enterprise met all such criteria, and if the minority group or women owner or owners subsequently transferred some or all of such owner's or owners' shares into one or more trusts for estate planning purposes, provided that in determining whether to certify such business entity, the commissioner shall consider whether such certification would advance the purposes of this subchapter, based on the following factors: (i) the degree to which transfers of shares to the trust or trusts resemble common estate planning practices; (ii) the degree to which the former owner or owners have a bona fide estate planning interest in selecting the trust beneficiaries and trustees; (iii) the degree to which day-to-day management obligations, including control of negotiations, signature authority for payroll, leases, letters of credit, insurance bonds, banking services and contracts, and other business transactions, and the ability to hire and fire employees, are retained by women or members of a minority group.
(iv)the degree to which voting shares are retained by minority group members or women; (v) the degree to which the business entity has provided to the Division adequate and transparent documentation memorializing the trust relationship; (vi) the degree to which the trust or trusts are revocable; and (vii) the degree to which the former owner or owners retain any liabilities or other legal exposure for the entity.
