This case challenged a final decision by New Jersey denying a company’s application for certification as a “women’s business” under N.J.S.A. 52:27H-21.17 and the governing regulations, N.J.A.C. 17:46-1.1 to -1.12.
Background of Case
By way of background, N.J. allows women owned businesses to certify to public agencies the eligibility of that business to bid on contracts as a women’s business. Once the Division places a women owned business in its database, “that business is eligible for all appropriate State programs and initiatives designed to ensure equal opportunity for … women’s businesses to participate in State purchasing and procurement processes.”
How Does NJ Define a Woman Owned Business?
N.J.A.C. 17:46-1.5(b).N.J.S.A. 52:27H-21. l 8(i) defines the term “Women’s[1] business” [as] a business which is:
(1) A sole proprietorship owned and controlled by a woman; or
(2) A partnership or joint venture owned and controlled by women in which at least 51% of the ownership is held by women and the management and daily business operations of which are controlled by one or more women who own it; or
(3) A corporation or other entity whose management and daily business operations are controlled by one or more women who own it, and which is at least 51% owned by women, or if stock is issued, at least 51% of the stock is owned by one or more women.
Thus, a corporation seeking certification as a women’s business must demonstrate that: (1) the “management and daily business operations are controlled by one or more women who own it,” and (2) it “is at least 51% owned by women, or, if stock is issued, at least 51% of the stock is owned by one or more women.” N.J.S.A. 52:27H-21.18(i)(3).
Here the corporation that applied to the Division for certification as a women’s business stated that 56% of the company was owned by two women. However, the corporation submitted business tax returns together with letters from the accountants that stated “that the corporation is a wholly owned subsidiary of another company.
Because it (the subsidiary corporation) was “100% owned, controlled, and operated by another entity the Division concluded that the “majority owner of the applicant business was not a woman” or women as required by N.J.S.A. 52:27H-21.18(i)(3). Therefore, the Division denied the company’s application for certification as a women’s business.
On appeal, the companies argued that the Division’s “decision was arbitrary, capricious, and unreasonable and should be reversed.” It also argued that the Division’s decision “runs contrary to” the legislative intent underlying the statutes governing the certification of women’s businesses.
Legal analysis of what qualifies as a woman owned business
The burden of showing the state agency acted in an arbitrary, capricious, or unreasonable manner rests on the party opposing the administrative action.
Here the Division found, a “women’s business” under N.J.S.A. 52:27H-21.18(i) must be controlled and owned by women. The applicant in this case, however, was owned and controlled by a corporation. As the Division stated in its final decision: “A review of the record of this matter reveals that a corporation owns 100% of the outstanding shares of the applicant company. While there are individual and trust beneficiary owners of a controlling corporation for purposes of . . . [c]ertification, there are no laws in New Jersey that allow for a corporate “person” to be given status of “one or more women” as is required by the statutory definition of “women’s business.” Thus, a business that is 100% owned by another business, as is the case here, cannot be considered a “women’s business[,”] as the term is defined in N.J.S.A. 52:27H-21.18(i).”
Accordingly, the appeals court was satisfied that the Division’s decision was not arbitrary, capricious, or unreasonable.
To discuss your NJ business and corporation matters, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Business and Corporation Attorney
[1] N.J.S.A. 52:27h-21.18(h) states that “‘[w]oman’ or ‘women’ means a female or females, regardless of race.”