Businesses must comply with ongoing disclosure requirements at both the state and local level, as well as the timelines disclosures must be made within. Disclosures are often necessary when a cannabis business’s ownership structure or standard operating procedures change. The disclosures are often made via email or online upload, and are typically straightforward. Just make sure you are monitoring these requirements on an ongoing basis at the state and local level. We will likely see fines, suspensions, and license revocations handed down by regulatory agencies across the country for failing to provide mandated updates.
Ownership & Financial Interest Disclosures
In general, cannabis regulators want to have a grasp of exactly who is opening a cannabis business in their jurisdiction. Cannabis applicants in California must make Ownership & Financial interest disclosures as part of their application, and cannabis licensees in California are required to update the State if owners and/or financial interest holders change. Pay very close attention to how these terms are defined by both the state and local regulations, as the definitions typically vary by jurisdiction. Ownership is often defined in two different ways:
- An individual or entity is an owner if they own X% of the applicant’s business
- An individual or entity is an owner if that manages or otherwise controls applicant’s business.
For example, Massachusetts sets the equity ownership percentage bar to qualify as an owner at 10%, whereas California sets it at 20%. Once again, make sure you apply your jurisdiction’s state and local regulations to your cannabis business. Similarly, individuals or entities that have invested or otherwise share in a cannabis business’s profits will likely need to be disclosed as a financial interest holder. Once a financial interest holder has been identified, double check to make sure that the individual or entity doesn’t qualify as an “owner” by virtue of their equity stake or control over the business.