December 5, 2023


Equality opinion

Oregon Marijuana: Proposed Rule Threatens Licensee Ability to Raise Capital

olcc conditional approval

This write-up continues our dialogue of rule variations proposed by the Oregon Liquor and Cannabis Fee (OLCC). (Other posts below and below, and please remain tuned for an omnibus write-up by Vince Sliwoski). Now the topic is a proposed revision to the procedures governing improvements in business enterprise structure. In distinct, a proposed conditional approval rule that threatens the potential of licensees to elevate funds.

How OLCC alterations in business enterprise construction perform these days

When a licensee desires to improve their small business framework, the current rules need the licensee to supply notification to the OLCC pursuant to OAR 845-025-1160(4). Below the current regulations, when a licensee adjustments its organization structure by introducing and unique or entity, the OLCC demands the licensee to notify the OLCC prior to addition of an particular person when that man or woman qualifies as an “applicant” as outlined in OAR 845-025-1145.

Beneath that rule, between other items, an applicant contains an individual or individual who holds or controls a immediate or oblique desire of additional than 20 per cent, or entitled to receive a part of earnings, proceeds, or income far more than 20 percent. For these kinds of persons the OLCC performs an inquiry to decide whether or not that person is licensable.

All of this means that when raising cash and seeking investors, the 20 p.c threshold is important. But even the 20 % threshold does not need pre-acceptance by the OLCC and permits licensees to elevate cash quickly by simply by notifying the OLCC and including the investor to their small business composition. If the trader were afterwards found unlicensable, the licensee would be needed to clear away the applicant. A licensee is not necessary to hold out for conditional approval from the OLCC and may perhaps raise cash promptly when needed.

The proposed conditional acceptance rule lacks adequate clarity to manual the OLCC, licensees and traders

The OLCC proposes to eradicate totally the Modify in Business construction rule found in OAR 845-025-1160(4) and substitute it with a new rule, OAR 845-025-1165. Among the improvements is that when a licensee submits the form notifying the OLCC of a change in business enterprise structure:

“The Fee ought to evaluation the kind and other info submitted less than portion (2) of this rule. If the Commission decides that the submission seems to be entire, the Fee will notify the licensee or laboratory licensee that the improve is conditionally approved.” OAR 845-025-1165(3).

So the proposed rule presents that if the OLCC determines the submission is entire, the OLCC will notify the licensee the change is conditionally accredited. But what if the submission is not full? Presumably, the OLCC would notify the licensee the modify is not conditionally accredited. If so, the rule should really say so explicitly. And if the submission is incomplete, could the licensee accurate the sort and resubmit? Presumably, sure. Why not say so in the rule?

An additional challenge is timing. The rule is silent as to how long the OLCC may perhaps choose to overview the kind and other facts to notify the licensee if the improve is conditionally accredited. And the proposed rule claims almost nothing about how extended the OLCC may get to notify the licensee if the adjust is not conditionally permitted. So how prolonged will the OLCC just take to critique the sort and other information and problem (or deny) a conditional acceptance to a adjust in company framework? No a single understands.

That absence of clarity would drastically have an affect on the means of licensees to include traders. And this may show disastrous for struggling licensees who will need an immediate money infusion, regardless of the indeterminate amount of money presented to the OLCC to review the alter of ownership form and conditionally approve the transform.

Observe: this author is not opposed to the concept of conditional pre-acceptance method. But this sort of a rule ought to be explicitly obvious about the timelines for the OLCC to complete its critique and its obligations to notify the licensees no matter whether or not the improve has conditional acceptance.

Community hearing tomorrow! (Oct 25)

A public listening to is scheduled on this proposed modify in locale rule, and other proposed guidelines, on October 25, 2022. The listening to will be at the OLCC offices in Portland and online from 10:00 – 11:00 am (Yeah, just one hour!). The previous day to remark on these policies is Halloween, October 31 at 12:00 p.m. Speak to details is in the url previously mentioned.

Hat idea to Alex Berger of Emerge Law on this challenge. Also, examine out our recent Oregon posts for much more on the latest point out cannabis licensing trends and OLCC updates.