On August 1, as expected, the Colorado Marijuana Enforcement Division (the “MED”) adopted emergency rules to implement HB-1090, commonly known as the “Pubco Bill,” passed by the Colorado Legislature in May to expand ownership of licensed cannabis businesses to public traded entities, venture capital, and private equity beginning November 1.
The emergency rules extensively revised Rules M 103 (medical definitions), R 103 (retail definitions), completely revised the M 200 and R 200 Series (ownership), and created a new Rule 200-1 Series (applications and licenses). HB-1090 and the new rules have completely overhauled the licensing system.
The Pubco Bill and the new rules created new categories of ownership, such as “Controlling Beneficial Owner” and “Passive Beneficial Owner,” while eliminating long-time categories such as “Affiliated Interest” and “Associated Key License.” The Colorado industry will need to learn a new nomenclature.
The adoption of the emergency rules by the MED, per a previous MED announcement in June, permits any licensee to enter into (but not close) agreements to sell to publicly traded entities and private equity and venture capital funds. The MED is scheduled to begin accepting applications for publicly traded entity and ownership by funds; however, it is unclear whether the MED will be ready for the November 1 “big bang,” and participants should be prepared for delays running into 2020 for these applications. Further information can be found on the MED’s 2019 rulemaking web page.
McAllister Garfield represents a number of licensees and buyers that are on the cusp of signing such agreements. If you have questions or seek advice concerning the emergency rules and these types of transactions, please contact McAllister Garfield.