Publicly Licensed Marijuana Companies

Licensed marijuana ownership - allow publicly traded corporations - controlling beneficial owners, indirect financial interest holders, and passive beneficial owners - rule-making authority - suitability finding - notification, disclosure, notice requirements - appropriation. The act repeals the provision that prohibits publicly traded corporations from holding a marijuana license.

The act creates new ownership concepts of controlling beneficial owners, indirect financial interest holders, and passive beneficial owners. The act repeals the concept of direct beneficial owner and the associated requirements. The act gives the state licensing authority rule-making authority related to the parameters of, qualifications of, disclosure of, requirements for, and suitability for the new ownership concepts. A "controlling beneficial owner" is limited to a person that satisfies one or more of the following criteria:

• A natural person, an entity as defined in section 7-90-102 (20) that is organized under the laws of and for which its principal place of business is located in one of the states or District of Columbia, a publicly traded corporation, or a qualified private fund that is not a qualified institutional investor:
• Acting alone or acting in concert, that owns or acquires beneficial ownership of ten percent or more of the owner's interest of a medical marijuana business;
• That is an affiliate that controls a medical marijuana business and includes, without limitation, any manager; or
• That is otherwise in a position to control the medical marijuana business except as authorized in section 44-11-407; or
• A qualified institutional investor acting alone or acting in concert that owns or acquires beneficial ownership of more than 30 percent of the owner's interest of a medical marijuana business.

"Indirect financial interest holder" is a person that is not an affiliate, a controlling beneficial owner, or a passive beneficial owner of a medical marijuana business and that:

• Holds a commercially reasonable royalty interest in exchange for a medical marijuana business's use of the person's intellectual property;
• Holds a permitted economic interest that was issued prior to January 1, 2020, and that has not been converted into an ownership interest;
• Is a contract counterparty with a medical marijuana business, other than a customary employment agreement, that has a direct nexus to the cultivation, manufacture, or sale of medical marijuana, including, but not limited to, a lease of real property on which the medical marijuana business operates, a lease of equipment used in the cultivation of medical marijuana, a secured or unsecured financing agreement with the medical marijuana business, a security contract with the medical marijuana business, or a management agreement with the medical marijuana business, provided that no such contract compensates the contract counterparty with a percentage of revenue for profits of the medical marijuana business; or
• Is identified by rule by the state licensing authority as an indirect financial interest holder.

"Passive beneficial owner" means any person acquiring any interest in a medical marijuana business that is not otherwise a controlling beneficial owner or in control.

The act requires a person intending to apply to become a controlling beneficial owner or passive beneficial owner to receive a finding of suitability or an exemption from the state licensing authority prior to submitting a marijuana business application. The act also requires a marijuana business or controlling beneficial owner that is a publicly traded corporation to comply with various notification, disclosure, notice, and suitability requirements. The act limits the types of publicly traded corporations that can be marijuana businesses or controlling beneficial owners.

For the 2019-20 state fiscal year, $2,783,561 was appropriated from the marijuana cash fund to the department of revenue.

(Note: This summary applies to this bill as enacted.)