On November 6, 2018, Missourians will have the chance to vote for one, none, or all of the initiatives to legalize medical marijuana. Currently, there are three initiatives on track to gather the signatures necessary to appear on the ballot.
As November 6th approaches, voters can expect the backers of each initiative to use emotional appeals in order to get their initiatives passed and have priority over other initiatives. Entrepreneurs taking steps now to enter Missouri’s medical marijuana industry will want to know exactly how each initiative addresses the transfer of financial interests. Whether your business plan emphasizes a short term buy out strategy or a long term income stream and legacy, the ability to transfer your assets in a highly regulated industry is a factor to consider.
Following are the provisions that expressly address the transfer of business licenses. The provisions are listed in the order their respective initiatives were first filed with the Missouri Secretary of State. The commonly used initiative name is in bold.
New Approach Missouri Amendment
Constitutional Amendment to Article XVI, Relating to Legalizing Marijuana for Medical Purposes 2018-040
Section 7(10). No Medical Marijuana Cultivation Facility, Medical Marijuana Dispensary Facility, Medical Marijuana-Infused Products Manufacturing Facility, Medical Marijuana Testing Facility, or entity with a transportation certification shall assign, sell, give, lease, sublicense, or otherwise transfer its license or certificate to any other entity without the express consent of the [Department of Health and Senior Services], not to be unreasonably withheld.
Constitutional Amendment to Article XIV, Relating to Legalizing Marijuana for Medical Purposes 2018-041
Section 4(i). No Medical Marijuana Cultivation Facility, Medical Marijuana Dispensary Facility, or Medical Marijuana-Infused / Extraction Products Manufacturing Facility shall assign, sell, give, lease, sublease, or otherwise transfer its license to any other individual or entity for at least five (5) years from the time of the initial application by the licensee, and then not without the express consent of the [Board of the Biomedical Research and Drug Development Institute], not to be unreasonably withheld. Licenses are transferable upon death by will or inheritance.
The Missouri Patient Care Act
Statutory Amendment to Chapters 192, 195, 263 & 311, Relating to the Legalization and Taxation of Medical Marijuana 2018-271
Section 195.933.2. For a transfer of ownership, a license holder shall apply to the [Division of Alcohol and Tobacco Control] and the local licensing authority on forms prepared and furnished by the division. In determining whether to permit a transfer of ownership, the division and the local licensing authority shall consider only the requirements of [this Act], any rules promulgated by the division, and any other local restrictions. The local licensing authority may hold a hearing on the application for transfer of ownership. The local licensing authority shall not hold a hearing under this subsection until the local licensing authority has posted a notice of hearing in the manner described in section 195.912 on the licensed medical cannabis center premises and/or the medical cannabis cultivation and production facility for a period of ten days and has provided notice of the hearing to the applicant at least ten days prior to the hearing. Any transfer of ownership hearing by the division shall be held in compliance with the requirements specified in section 195.912.
Section 195.936.11. A licensee shall report each transfer or change of financial interest in the license to the [Division of Alcohol and Tobacco Control] and the local licensing authority thirty days prior to any transfer or change under subsection 13 of this section. A report shall be required for transfers of capital stock of any corporation, regardless of size.
Source: Initiatives are available for download on the Missouri Secretary of State’s webpage, “2018 Initiative Petitions Approved for Circulation in Missouri.” https://www.sos.mo.gov/petitions/2018IPcirculation#2018040.
All three initiatives require the state licensing agency to give permission prior to the transfer of a medical marijuana business license. A local licensing authority, such as a municipality or county, must also approve the transfer under The Missouri Patient Act and only the Bradshaw Amendment expressly allows a transfer by will or inheritance.
It remains to be seen how other provisions in each initiative—such as the personal qualifications for holding a license and the limitations placed on the number of medical marijuana businesses that are under substantially common control, ownership or management—will effect transferability. The rules and regulations that will implement and administer any new law will further impact the circumstances under which life-time and death transfers can be made.
While only time will tell which initiative, if any, becomes law, it is prudent for investors and equity team members to consider how they will protect and potentially transfer their financial interests as they develop plans to enter Missouri’s medical marijuana industry.
For further reading, Wendy S. Goffe of Stoel Rives LLP in Seattle, Washington, has penned several articles discussing estate planning issues for the marijuana business owner. Her article, Clients And Cannabis: Don’t Let an Estate Plan Go Up in Smoke, was published by the Estate Planning and Administration Section of the Oregon State Bar in its October 2017 Newsletter and was accessible online as of March 22, 2018.
This article is solely intended to identify the transfer provisions in the initiatives most likely to appear on the November 2018 ballot and does not constitute legal advice or create an attorney-client relationship.