MED ISSUES GUIDANCE ON EMERGENCY RULES FOR “PUBCO” BILL

Friends,

On September 3, the Colorado Marijuana Enforcement Division (the “MED”) issued guidance FOR the emergency rules implementing HB-1090, commonly known as the “Pubco Bill,” which goes into effect November 1.

Much of the publicity and activity concerning implementation of HB-1090 and the emergency rules has focused on publicly traded entities and private equity funds taking ownership of licensees. However, many of the new rules affect all licensees, regardless of their ownership structure, so the MED’s guidance discussed a range of issues:

1. The MED reiterated its guidance from June that, since the adoption of the emergency rules, licensees may enter into binding agreements with “Publicly Traded Corporations” and “Qualified Private Funds,” provided that “no control of the Licensee may transfer” to such potential buyers, and no funds are transferred between buyer and seller without approval of the transaction by the MED after November 1st.
2. The MED will begin accepting applications for ownership by Publicly Traded Corporations and Qualified Private Funds on November 1. Updated application forms will be available on or before November 1.
3. Until November 1, for licensees adding “Controlling Beneficial Owners” (“CBOs”) (generally, owners of 10% or more of a licensee), applicants should submit the MED’s current forms for Associated Key License and Change of Owner.
4. CBOs who are out of state residents are no longer required to first obtain a “non-resident finding of suitability” prior to submitting other required applications such as Associated Key or Change of Owner.
5. Applications and pre-approval are no longer required for Passive Beneficial Owners (“PBOs”) (those owning less than 10% of a licensee). Instead, licensees need only disclose PBOs to the MED.
6. The MED will no longer accept applications for Permitted Economic Interests and Commercially Reasonable Royalties as they longer require approval from the MED, but are now subsumed within the category of “Indirect Financial Interest Holder,” which instead require only disclosure to the MED in certain instances.

Further information concerning the new rules can be found on the MED’s 2019 rulemaking web page.

If you have questions or need advice concerning the emergency rules or any other issue concerning the regulated cannabis industry, please contact McAllister Garfield.

Sincerely,

Dan Garfield