California’s three cannabis agencies–the Bureau of Cannabis Control (BCC), California Department of Food and Agriculture (CDFA), and California Department of Public Health (CDPH)–aggressively regulate every aspect of the state’s licensed cannabis industry. Most of the agencies’ rules make sense or have some justifiable purpose. Today, I want to talk about some of the rules that create the biggest headaches for cannabis licensees in the Golden State. This list is by no means exhaustive, but we have seen a lot of stakeholders struggle with compliance with each of them.
#1 Post-Approval Ownership Changes
The California cannabis agencies have detailed regulations requiring disclosures of changes of “owners” and “financial interest holders”. What makes these rules problematic is that the agencies require disclosures after the changes take place (unlike many municipalities which require pre-approval). These rules, in my opinion, are some of the worst and can make cannabis transactions extremely difficult to draft.
For example, say a company wants to buy 50% of the shares of a licensed cannabis entity. That company will have to acquire those shares before being disclosed to the cannabis agencies. Problematically, there’s always a risk that the agencies could come back and refuse to approve the acquisition.