This post was originally made October 7th, 2015.
For months common wisdom in the canna-law community was that a license could not be transferred from one business entity to another after it had been issued. The accepted practice for a license to change hands was for the business entity that had acquired the license to change hands. As my good friend and talented cannabis law attorney Jillian Cook at TZMC Law put it: "Shareholders, officers, and directors come and go, but UBI numbers are forever." Depending on the Washington State Liquor Cannabis Board (WSLCB) investigator you might be able to get away with a transfer from one entity to another pre-issuance, but definitely not post-issuance. However, the WSLCB appears to have made an about-face in policy. MRM's experience as-of-late has been a complete break from this structure.
In recent months the WSLCB has started telling our clients they may not transfer a license application from one business entity to another pre-issuance. Instead, they may only transfer the license to another business entity once it has been issued. In dealing with the WSLCB our office has been told that the unofficial reason is the WSLCB is tired of applications spending several months (or years) going through the application process. One reason they credit for this is the inability to transfer a license to another entity once it has been issued. Accordingly, some WSLCB investigators are no longer allowing a pre-issuance transfer to another business entity at all.
The WSLCB is referring to this post-issuance transfer as the "assumption process." While the WSLCB has not been exceedingly clear about this process, it appears that it is authorized by recent changes to WAC 314-55-135. A new version of that provision went into effect on June 20, 2015. The previous version had been effective since November 21, 2013. The old version of the provision read in its entirety:
"WAC 314-55-135 Discontinue marijuana sales. You must notify the board's enforcement and education division in writing if you plan to stop doing business for more than thirty days, or if you plan to permanently discontinue marijuana sales."
The new version of the provision has multiple subsections, with one referring to "Assumptions." It states:
"Assumptions: Assumption of license and purchases by licensee of certain marijuana inventory and stock. In the case of a sale of business with a licensee, after obtaining the approval of the board and under the supervision of a representative of the board, the licensee may sell the entire inventory at a negotiated fair market price. Sales below cost are prohibited."
This is vague language to say the least. Arguably the definition of "business" could refer to a business entity or it could be used in the more amorphous sense of "customer goodwill" and "means of production." Practically, the WSLCB seems to be adopting the latter definition and is beginning to allow the "assumption" of a marijuana license by a separate business entity than it was originally issued to. What is clear is that the purchaser of a marijuana license still has to be approved by the WSLCB and the transfer must be supervised by the WSLCB. This is good news for those who want to get into the marijuana industry, missed the license application window, and have the money....unless down the road the Washington Supreme Court interprets WAC 314-55-135 more conservatively than the WSLCB that is.
Eli Marchbanks, Attorney and Co-Owner of MRM Law Group
Every legal issue is very unique. Accordingly, the information in this blog is intended as general education material and not as legal advice. If you think you may have a legal issue you should consult an attorney.
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