on February 2, 2017
A recent Massachusetts Bankruptcy Court decision should serve as a clear reminder to business owners that, in order to enjoy the benefits that limited liability entities afford, one must respect established corporate formalities and comport business accordingly. Briefly, in In Re: Cameron Construction & Roofing Co., Inc. the Bankruptcy Court held that the assets of a Massachusetts limited liability company, closely related to a Massachusetts construction business subject to Chapter 7 bankruptcy proceedings, could be reached to satisfy the claims of the creditors of the construction business.
The two separate entities shared a common owner yet were formed as distinct enterprises. In this case, however, the Court determined that the owner controlled both the non-debtor LLC and debtor construction business and had allowed for the intermingling of assets. Further, the Court noted that the common owner “was thinly capitalized, and the two entities observed only minimal corporate formalities by filing separate tax returns and Annual Reports.” Thus, the Court held that ‘substantive consolidation’ was the appropriate remedy- effectively disregarding the sovereignty of the separate entities and combining their assets as a means to satisfy the liabilities of one. Had the owner resected the separate corporate forms of his commonly owned entities in his everyday operations he likely would have been in a better position to shield assets held by the non-debtor LLC from creditor access.
on February 29, 2016
The Massachusetts Division of Capital Asset Management and Maintenance (DCAMM) recently announced that contractors will soon be able to utilize an online application process for certification. It will include the ability to pay fees online as well as online access to documents such as Certificates of Eligibility. The website is expected to be ready in March, 2016. Follow the link below for more information.
on February 22, 2016
In a recent decision, the Massachusetts Attorney General’s Bid Protest Unit ruled that in certain circumstances a prime or general bidder on public construction projects can use the experience and qualifications of a subcontractor to meet the requirements of the project specifications.
The case, In re Department of Mental Health, Attorney General Bid Protest Decision (February 19, 2016), involved bid documents that required bidders to have at least five years of experience with smoke and fire damper maintenance. The protester argued that the general contractor submitting the low bid did not have such experience. In rejecting the protest, the hearing officer found that the low bidder’s subcontractor’s experience met the qualification.
The ruling is expressly limited to unique circumstances. The word “bidder” usually is limited to the general or prime bidder in public construction. Here, however, the bid documents stated that a sub-bid is called a “bid.” It appears that future bid documents will need similar language for the general or prime bidders to be able to rely on subcontractors’ experience in meeting the requirements for bidders. Our Massachusetts construction lawyers will continue to monitor the impact of this decision.