MNO Corporation wants to obtain a contractor license. The qualifying individual owns 15% of the corporate stock. Is this sufficient?
Correct Answer
D) No, must own at least 20%
Under B&P Code Section 7068.1, a qualifying individual for a corporation must own at least 20% of the voting stock.
Why This Is the Correct Answer
Under B&P Code Section 7068.1, a qualifying individual (also called a Responsible Managing Officer or Responsible Managing Employee in a corporate context) who is also an officer of the corporation must own at least 20% of the corporation's voting stock to qualify the license. Owning only 15% falls short of this 20% minimum threshold, so MNO Corporation's qualifying individual does not meet the ownership requirement.
Why the Other Options Are Wrong
Option A: Yes, 15% meets the minimum requirement
15% does not meet the minimum requirement under B&P Code 7068.1. The 20% threshold exists to ensure that the qualifying individual has a meaningful ownership stake and genuine accountability for the corporation's contracting activities.
Option B: No, must own at least 10%
There is no 10% minimum ownership requirement in B&P Code 7068.1. This option understates the actual statutory threshold. The correct minimum is 20%.
Option C: Ownership percentage is irrelevant
Ownership percentage is not irrelevant — it is specifically defined and legally required under B&P Code 7068.1. The legislature set the 20% ownership minimum to ensure the qualifying individual has sufficient skin in the game and cannot be easily removed or sidelined by other shareholders.
Memory Technique
Remember '20% = 1 in 5 shares' — the qualifying individual must own at least 1 out of every 5 shares (20%) of the corporation. Think of it as needing a 'meaningful stake' — a fifth of the company.
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