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ARTICLE · 07 FEBRUARY 2025

SBA Final Rule Updates Negative Control Requirements And 8(a) Ownership Rule

Bass, Berry & Sims PLC
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On December 17, the Small Business Administration (SBA) published its final rule detailing new recertification requirements following mergers and acquisitions (M&A)...

United StatesGovernment, Public Sector
Todd Overman
Todd Overman

On December 17, the Small Business Administration (SBA) published its final rule detailing new recertification requirements following mergers and acquisitions (M&A), new language around negative control for affiliation purposes, and changes to 8(a) ownership percentages, among other changes. We discussed the new recertification requirements and their potential impact on GovCon M&A in a previous blog post that can be found here. Below we discuss the new negative control rule and the 8(a) ownership changes.

Clarifying Negative Control Rule

SBA's interpretation of the extent to which minority investors in small businesses can possess "negative controls" without triggering affiliation has long been a point of debate. Affiliation is triggered when minority investors in small businesses control the day-to-day operations and therefore have the power to "control" the small business. However, case law from the SBA's Office of Hearings and Appeals (OHA) began poking holes

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