Lesson 1, Topic 1

In Progress

License Management

Term of License and License Renewal

Let’s break down what you need to know about the terms of your license and how to renew it.

First things first, issues licenses are good for five years starting from when you first pay the conversion fee. Remember, staying compliant with all the Administration’s guidelines is a must. This includes following everything they post, from bulletins to seed-to-sale tracking instructions.

Now, onto renewing your license:

When it expires: You’ll get a heads-up from the Administration 90 days before your license is up, detailing when it’s set to expire, how to renew it, and what it’ll cost you.
What you need to renew it: Make sure you submit your renewal application at least 30 days before the expiration. This application should include a fresh set of fingerprints for background checks, a recent full inspection of your premises (unless you’ve had one in the last three months), and, of course, the renewal fee.

If everything is in order, the Administration will renew your license for another five years.

However, if your application is missing something or you flunk the inspection, don’t panic! You’ll get a chance to fix any issues by submitting a corrective plan and amending your renewal application. Keep in mind, though, that if you’re found frequently violating health and safety rules, or if your application is still lacking, the Administration might deny your renewal.

Forgot to apply for renewal on time or got denied? You’ll have to stop all operations and can’t distribute cannabis until you’ve paid a reinstatement fee and your reinstatement application gets approved.

Lastly, be careful with your business name when registering with the State Department of Assessment and Taxation. Avoid using terms like “cannabis” or “marijuana,” and make sure you’re not stepping on any copyrighted toes.

For those with micro licenses, there are a few extra things to keep in mind:

Operational limits: Make sure you’re not exceeding the limits that were discussed earlier in this lesson set for growing, processing, or dispensing.
Compliance checks: In the first two years, the Administration will check in to ensure you’re keeping within these limits. They’ll measure growers’ canopy, check processors’ seed-to-sale records, and verify that dispensaries are sticking to their designated region and employee count, and don’t run a physical storefront.

If you step outside these boundaries, the Administration could impose restrictions, fines, or other penalties.

Change of Location

Let’s talk about what to do if you need to change the location of your operation.

Here’s the step-by-step process:

Applying for a Change: If you need to move your operations, you must fill out the specific form provided by the Administration and pay the designated fee.
Waiting for Approval: Don’t jump the gun and start growing, processing, or dispensing cannabis at the new spot until you get the green light from the Administration. It’s crucial that you wait for their approval before you begin any operations at the new location.
Restrictions for Dispensaries: If you’re running a dispensary, keep in mind that you can only relocate within the same county where your original license was granted. This keeps things local and consistent with your initial licensing terms.

For those with micro licenses:

Expanding Your Area: If you have a micro license and want to serve more areas, filing a petition to expand your service area isn’t the same as changing your location. So, you’d handle this differently and it doesn’t count as a relocation under the regular rules.

Transfer of Ownership and Control

Let’s breakdown what you need to know about transferring ownership interests in a cannabis license:

Basics of Ownership Transfer

Generally, you can’t just transfer a cannabis license. However, transfers are allowed under these specific conditions.

Small Changes

If you’re transferring less than 5% of the license and the person receiving the share won’t end up owning 5% or more, you don’t need the Administration’s approval.

Getting Approval

To get the nod from the Administration for a larger transfer, you’ll need to:

Notify them with the right form.
Make sure the transfer follows all local cannabis laws.
Pay any required fees.
Provide criminal and financial background info on the new owner.

Reasons for Denial

The Administration might deny a transfer if:

There are outstanding taxes due by the transferee.
It violates specific regulatory codes.
The transfer tries to shift a controlling interest within the first five years of operation (unless due to specific exceptions like death or bankruptcy).
The new owner would have the future right to a controlling interest too early.

Also, if the new owner has a history involving crimes of moral turpitude, the transfer can be denied.

Additional Restrictions

No individual or entity can hold more ownership than allowed by state law.

If a Transfer Goes Through

If a transfer is approved but later found to violate laws, the Administration can fine the involved parties, void the transfer, or even rescind the license.

Before the Transfer

You must do a full inventory of all cannabis products.

Employee Stock Options

You can issue stock options to employees as part of compensation, but:

You’ll need to submit a detailed plan for approval.
Pay a fee for each employee getting stock.
Get the plan approved by the Administration.

Once approved, you can issue stock without further approval, but:

No employee can own more than 5%.
It shouldn’t change who controls the license.

Finally, you’ll need to report annually on the stock issued, held, and transferred under the plan.

Management Agreements

Let’s simplify the rules around management agreements in the cannabis industry:

Definition and Basics

A “management company” is any entity that provides management services to a licensed cannabis business.
Before they can start, management companies need to be approved by the Administration and must be in good standing with the State Department of Assessments and Taxation.

Setting up the Agreement

Licensees must provide a copy of any management agreement to the Administration. This includes detailing compensation, criminal and financial backgrounds of the managing party, and any other requested information.

Approval Process

For a management agreement to take effect, the Administration needs to:

Receive notification and a copy of the agreement.
Collect a specified fee.
Approve the agreement itself.

Possible Grounds for Denial

The Administration may deny a management agreement if:

It effectively transfers ownership of a license illegally.
Background checks reveal serious criminal offenses.
The agreement illegally transfers control of the license.
The licensee doesn’t provide requested additional documentation.
The agreement violates specific regulatory guidelines.
Any other reason the Administration sees fit (referred to as “good cause”).

Changes in Management Agreements

If there’s a significant change in the management agreement, like a change in ownership or control of the management company, the licensee must:

Provide relevant information to the Administration.
Get approval from the Administration before the changes take effect.

Restrictions on Agreements

Management agreements must not force licensees to:

Adopt a marketing plan tied to the management company’s brand.
Sell or distribute cannabis products only under a plan largely dictated by the management company.
Limit their product offerings to those connected financially to the management company.
Plan for a future transfer of their license ownership to the management company.

When Agreements Might Shift Control:

An agreement is considered a transfer of control if it gives the management company:

Unilateral control over major business decisions.
The right or authority to make significant marketing, production, and financial decisions.
Payment terms from the licensee that exceed set financial thresholds based on the licensee’s revenue or profits.

Conversation to Micro to Standard License

Let’s breakdown how a micro licensee can upgrade to a standard license:

Eligibility and Application

If you’re a micro licensee in good standing and have been operational for at least 24 months, you can apply to convert to a standard license. The process for this application is determined by the Administration.

Reasons for Denial

The Administration might deny your conversion request if:

You haven’t been operational for at least 24 months.
You’ve violated any operational restrictions.
The conversion would breach ownership or control restrictions.
You fail to provide adequate notice to the Administration.
Any other reason the Administration deems as “good cause”.

Validity of the New License

Once converted, the new standard license will remain valid up to the expiry date of your initial micro license.

Financial Aspects

Before the conversion, you need to settle a pro-rated license fee. This fee is calculated by deducting any fees already paid for the micro license from the standard license fee, then adjusting for the remaining months on your original 5-year micro license term.

Conditions and Limitations

Upon conversion:

You must forfeit your micro license, which the Administration might re-award in future licensing rounds.
The conversion can only be to the corresponding standard license type.
You cannot convert the license to an incubator space or on-site consumption license.

License Allocation

The Administration ensures there are enough standard licenses reserved, by type, to accommodate conversions from micro licenses.