On Wednesday, the Maryland Medical Cannabis Commission (MMCC) issued a new bulletin regarding changes of ownership and third-party management agreements for growers, processors, and dispensaries. The bulletin, which by its own terms “does not change, remove, or replace any existing regulations under COMAR 10.62,” does have the impact of further clarifying the process that MMCC will use to handle transfers and review of management agreements.
The bulletin reiterates previously issued guidance that all individuals, partnerships, corporations and any other entity holding an interest of five percent or more in a licensed business must submit criminal history and financial background information, and specifies that this applies to all original applicants and any new investors. The bulletin also lays out, for the first time in this form, guidance for how licensed businesses can (and must!) seek MMCC approval for a transfer involving five percent or more of an ownership interest.
The bulletin also tackles for the first time the issue of management agreements. A management agreement is a contractual arrangement between a licensed business and third-party manager whereby the manager agrees to operate and manage certain components of the licensed business’ operations in exchange for management fees. Management fees may be based on revenues or set monthly amounts. The laws and regulations of the Maryland cannabis program do not explicitly reference management agreements. It has become apparent that management agreements have become an essential part of how the Maryland program is developing.
Wednesday’s bulletin signals that the MMCC is going to be taking on the issue of management agreements. It also states that all licensed businesses with active management agreements must submit them to the MMCC for review and approval by March 12th, 2018. The bulletin does not specify the timeline, process or criteria by which these documents will be evaluated.
To be sure, this is not the last that we will be hearing on either the issue of transfers or management agreements. We expect that the MMCC’s handling of both issues will be further clarified through public comments, bulletins, and course of dealing over time. Despite the long run-up and roll-out of the program over the last 3+ years, there are many issues – including these – which still need to be worked out over time.
The cannabis practice group and experienced attorneys at Offit Kurman stand ready to advise licensees, investors, and third-party managers on how to become and stay compliant with the changing legal landscape of the Maryland medical cannabis program. We encourage you to reach out to us if you would like to schedule a personalized conversation.
Questions about this or any other cannabis law issues, please contact us.
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