Title of Regulation: 7VAC13-20. Regulations to Govern the Certification of Small, Women-Owned, and Minority-Owned Businesses (amending 7VAC13-20-10, 7VAC13-20-150, 7VAC13-20-190, 7VAC13-20-220).

Statutory Authority: § 2.2-1606 of the Code of Virginia.

Effective Date: February 8, 2017.

Agency Contact: Reba O'Connor, Regulatory Coordinator, Department of Small Business and Supplier Diversity, 101 North 14th Street, Richmond, VA 23219, telephone (804) 593-2005, or email reba.oconnor@sbsd.virginia.gov.

Summary:

The amendments (i) add a definition of "gross receipts," (ii) remove incorrect language regarding application of the Administrative Process Act, and (iii) remove a provision prohibiting a business whose certification has been revoked from reapplying for certification after revocation.

7VAC13-20-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Affiliate" means a business that is connected in some way, whether financially or legally, to a business that has applied to the department for certification as a small, women-owned, or minority-owned business (see the federal Small Business Administration regulations, 13 CFR Part 121). The following requirements, conditions, and factors are applicable:

1. Businesses are affiliates of each other when, either directly or indirectly:

a. One business controls or has the power to control the other;

b. A third party controls or has the power to control both;

c. An identity of interest between or among parties exists such that affiliation may be found; or

d. One business or company has ownership, direct or indirect, of 10% or more of the voting stock of another business. (See the Investment Company Act, 15 USC § 80a-2.)

2. In determining whether affiliation exists, it is necessary to consider all appropriate factors, including common ownership, common management, and contractual relationships. Affiliates must be considered together in determining whether a concern meets small business size criteria and the statutory cap on the participation of firms in the small, women-owned, or minority-owned business certification program.

"Agent" means a person that (i) has the authority to act on behalf of a principal in transactions with third parties; (ii) is subject to the principal's control; and (iii) does not have title to the principal's property.

"Appeal" means a written request by an applicant to reconsider a denial or revocation of certification.

"Applicant" means any business that applies to the department for certification or recertification as a small, women-owned, or minority-owned business.

"Application" means the documents the department requires the applicant to submit in the course of certification or recertification, including the application form the applicant submits under penalty of perjury, which may include any additional documentation that the department requests that the applicant submit, and any information or report that the department generates during or upon completion of an onsite visit.

"Broker" means a person who acts as an intermediary between a buyer and seller.

"Business" means any legal entity organized in the United States or a commonwealth or territory of the United States that regularly engages in lawful commercial transactions for profit.

"Certification" means the same as that term is defined in § 2.2-1604 of the Code of Virginia.

"Certified" means the status accorded to an applicant upon the department's determination that the applicant has satisfied the requirements for certification as a small, women-owned, or minority-owned business.

"Control" means the power to direct the operation and management of a business as evidenced through governance documents and actual day-to-day operation.

"Corporation" means a legal entity that is incorporated under the law of a state, the United States, or a commonwealth or territory of the United States.

"Day" means any day except Saturday, Sunday, and legal state holidays unless otherwise noted.

"Dealer" means a person or business that has the exclusive or nonexclusive authority to sell specified goods or services on behalf of another business.

"Department" means the Department of Small Business and Supplier Diversity.

"Director" means the Director of the Department of Small Business and Supplier Diversity or his designee.

"Expiration" means the date on which the director specifies that a certified business will cease to be certified.

"Franchise" means a contractual arrangement characterized by the authorization granted to someone to sell or distribute a company's goods or services in a certain area.

"Franchisee" means a business or group of businesses established or operated under a franchise agreement.

"Gross receipts" means the amount reported as gross receipts of sales by the applicant on line 1 or 1(A) of the applicable federal income tax return as filed with the United States Internal Revenue Service.

"Individual" means a natural person.

"Joint venture" means a formal association of two or more persons or businesses for the purpose of carrying out a time-limited, single business enterprise for profit, in which the associated persons or businesses combine their property, capital, efforts, skills, or knowledge, and in which the associated persons or businesses exercise control and management and share in profits and losses in proportion to their contribution to the business enterprise.

"Limited liability company" means a specific type of legal entity that is in compliance with the applicable requirements of the law of its state of formation.

"Manufacturer's representative" means an agent whose principal is a manufacturer or group of manufacturers.

"Minority individual" means the same as that term is defined in § 2.2-1604 of the Code of Virginia.

"Onsite visit" means a visit by department representatives to the applicant's physical place of business to verify the applicant's representations submitted to the department in the course of certification or recertification.

"Ownership" means an equity, a partnership, or a membership interest in a business.

"Partnership" means an association of two or more persons to carry on as co-owners a business for profit.

"Person" means a natural person or a business.

"Principal" means a person who contracts with another to act on the contracting person's behalf subject to that person's control.

"Principal place of business" means the physical business location where the business maintains its headquarters, where the business's books and records are kept, and where the natural persons who direct, control, and manage the business's day-to-day operations are located. If the offices from which management is directed and where the business records are kept are in different locations, the department will determine the principal place of business.

"Pro forma" means as a matter of form or assumed information.

"Recertification" means the process by which a business applies to the department for renewed or continued status as a certified business.

"Record" means the materials submitted in support of an application for certification or recertification, which may include the application, supporting documentation, and additional materials obtained by the department in the course of the application, certification, or recertification process.

"Sole proprietorship" means a business whose assets are wholly owned by a single person.

"Virginia-based business" means a business that has its principal place of business in Virginia.

7VAC13-20-150. Procedures for initial certification.

A. Any business that meets the criteria for certification may file an official application with the department.

B. The application will be reviewed initially for completeness. The department may conduct an onsite visit of the business to obtain or clarify any information. The onsite visit may be scheduled or unannounced.

C. The department may request the applicant to provide additional information or documentation to provide clarification and substantiation of certain criteria or to resolve any ambiguities or inconsistencies in an application.

D. The department may impose a time limit in which the applicant must provide the requested information. A reasonable extension may be given by the department for good cause shown by the applicant. Requests for time extensions must be made to the department in writing and should specify the length of time for which the extension is being requested and the reasons for the request. Failure to provide such information or documentation shall render the application administratively closed.

E. After reviewing the application, the department shall issue either a notice of certification or a notice of denial of certification stating the reasons for denial and offering the applicant the opportunity for an informal hearing pursuant to § 2.2-4019 of the Code of Virginia.

F. A business certified by the department under this section shall be certified for a period of three years unless (i) the certification is revoked before the end of the three-year period, (ii) the business is no longer in business, or (iii) the business is no longer eligible as a small, women-owned, or minority-owned business.

G. The applicant shall be responsible for notifying the department immediately of any change in legal structure, ownership, control, management, or status of the business within 30 calendar days of such change. Failure to do so may be grounds for revocation of certification.

H. It shall be the responsibility of the applicant, the certified business, or both to notify the department of any change of name, address, or contact information and to keep the department informed of the current address and contact information. Changes of name and address must be reported to the department in writing within 30 calendar days of such change. Failure to do so within 30 calendar days of such change may be grounds for revocation of certification. The department shall not be liable or responsible if a certified business fails to receive notices, communications, or correspondence based upon the certified business's failure to notify the department of any change of address or to provide correct address and contact information.

7VAC13-20-190. Notice of denial.

The department shall notify the applicant of the denial of its application for certification or recertification in writing no later than 15 days from the date of the decision by the department. The notice shall state the reasons for the denial of certification or recertification and offer the applicant the opportunity to appeal the decision as provided in the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

7VAC13-20-220. Reapplication.

A. A business whose application for certification has been denied may reapply for the same category of certification 12 months after the date on which the business receives the notice of denial if no appeal is filed or 12 months after the appeal is exhausted. An applicant denied certification as a women-owned or minority-owned business may reapply for certification as a small business without delay if otherwise eligible.

B. The applicant may request a waiver of the 12-month reapplication period from the department director by submitting a written request for reconsideration and providing a reasonable basis for the waiver. The director or his designee, in his discretion, shall render a final decision regarding the request for reconsideration and waiver within 30 days, which determination shall not constitute a case decision subject to appeal.

C. A business whose certification has been revoked may not reapply for certification in the same classification.