If a number of of the homeowners of a license change, the brand new homeowners shall submit the data required for . . . every new proprietor be submitted to the [BCC] inside 14 calendar days of the efficient date of the possession change.”
This timeline is sort of the identical as what was set forth beneath the emergency guidelines–it’s no shock that the state has a deadline on disclosure for modifications in possession, because it impacts licensure. Nonetheless, that is the brand new curve ball for the M & A crowd pursuant to part 5023:
The enterprise might proceed to function beneath the lively license whereas the [BCC] evaluations the of the brand new proprietor(s) in accordance with [MAUCRSA] and these rules to find out whether or not the change would represent grounds for denial of the license, if at the least one present proprietor will not be transferring his or her possession curiosity and can stay as an proprietor beneath the brand new possession construction. If all homeowners will likely be transferring their possession curiosity, the enterprise shall not function beneath the brand new possession construction till a brand new license software has been submitted to and authorised by the [BCC], and all software and license charges for the brand new software have been paid . . . In instances the place a number of homeowners go away the enterprise by transferring their possession curiosity to the opposite present proprietor(s), the proprietor or homeowners which might be transferring their curiosity shall present a signed assertion to the [BCC] confirming that they’ve transferred their curiosity.”
In my expertise, most enterprise consumers in hashish are searching for a full buy-out. And your typical hashish M & A deal will (hopefully) have as a situation to closing that the state and/or native authorities(s) approve of the transaction/new purchaser(s) previous to closing. Nonetheless, in California, retailers, labs, and distributors won’t be able to function throughout an entire buy-out whereas the state is processing not solely the entire new homeowners (together with their background checks) but additionally a wholly new license software, which may take weeks or months to finish. Unquestionably, consumers will need the enterprise to maintain working through the transaction so that is going to be problematic for an entire buy-out, and it’s just about unprecedented that the enterprise shuts down through the transition.
What we’re now very more likely to see then is that at the least one of many authentic promoting homeowners will all the time keep on the licensed entity as a part of the transaction and solely after the state clears the brand new license software will that particular person lastly be capable of switch all of their fairness (as soon as they supply that written assertion to the BCC). What this implies is that buy-outs of hashish companies in California simply obtained that a lot more durable and risk-laden for consumers as these transactions will now definitely drag out and turn into much more difficult.
And should you’re not taking a look at a full buy-out, life is considerably simpler in that “[a] change in possession doesn’t happen when a number of homeowners go away the enterprise by transferring their possession curiosity to the opposite present proprietor(s),” and modifications to monetary curiosity holders (i.e., anybody who holds lower than 20% of the enterprise’s fairness) don’t represent a change of possession that warrants a brand new software, and so forth.
You could be considering that there’s a silver lining right here in that these new guidelines might solely apply particularly to annual licenses. Nonetheless, regulators ensured that the change of possession requirements apply to those that maintain a “License,” which is outlined statutorily as “a state license issued beneath this division, and contains each an A-license and an M-license, in addition to a testing laboratory license.” In flip, these requirements ought to apply to these firms that maintain non permanent, provisional, and annual licenses.
California has definitely set itself aside as a really combined place on the subject of hashish enterprise friendliness. And these current BCC-imposed modifications of possession, at the least for my part, assist carry the state nearer to extra arbitrary obstacles to entry than obligatory.