qualifying for a commercial marijuana license

Medical Marihuana Facility Licenses: Will I Qualify?

The Michigan Medical Marihuana Facilities Licensing Act (“MMFLA”) establishes five commercial marijuana licenses: grower, processor, provisioning center, secure transporter and safety compliance facility.  We’ve previously blogged about the license qualifications contained in a prior version of the law.  Now that the MMFLA will become law on December 20, 2016, we discuss below the main qualifications which will be applied to determine if an applicant will qualify for a license.

In reviewing these qualifications, remember two things.  First, an “applicant” is broadly defined in the law.  For non-natural persons, it includes shareholders, LLC members, officers, directors and managerial employees, plus others who have direct or indirect ownership interests in the applicant.  Disclosures are also required by spouses of shareholders and LLC members.  Second, there will be a set of rules established by the Board in the future that will cover many of the details of the application process and criteria.

MMFLA Licensing.

There are several different license qualifications established in MMFLA Part 4.  Section 401lays out the information the application must contain, as well as required disclosure and consent.  Sections 402(1) and (2) describe conditions that will prohibit the issuance of a license.  Section 402(3) outlines certain additional criteria that the Board may also consider in determining if a license should issue to a particular applicant.  Finally, the remainder of Part 4 covers miscellaneous requirements and conditions to license issuance, maintenance and renewal, and spousal disclosures for corporations and LLC’s.

Information Disclosure — 401(1)(a-l). 

An application must be made under oath and provide the following information:

  • Identifying information like name, address, phone, SS number, and tax ID;
  • All equity owners of the applicant;
  • Any marijuana grower, processor, provisioning center, lab or transporter business in which the applicant (including spouse, parents and children) has an equity interest;
  • History of applicant’s encounters with the criminal justice system;
  • Commercial license history;
  • Ownership of applicant by government officials (including spouse, parents and children);
  • Type of marijuana facility applied for and projected employment and revenues;
  • Such additional financial information as the Board requires;
  • The municipal ordinance allowing a marijuana facility of the type applied for by applicant; and
  • Any other information the rules of the Department of Licensing and Regulatory Affairs require.

Consent to Background Checks, No Prohibited Ownership, Payment of Fees — 401(2) through (5). 

The Board will use the application information to conduct a background investigation.  The applicant must consent to inspections, examinations, searches, seizures, disclosures, and access to tax and financial records.  The applicant must certify the absence of prohibited ownership of other licenses, and the required application fee must be paid.

Application Denial — 402(1) through (3).

Based on the applicant’s disclosures and the Board’s investigation, sections 402(1) and (2) make the applicant ineligible for a license if the Board determines the following:

  • That the applicant’s criminal record shows a felony within the past 10 years or a controlled substance misdemeanor within the last 5;
  • That the application information was knowingly false;
  • The applicant fails to show he (it) can obtain and maintain required insurance;
  • The applicant holds government office, or is a Board member;
  • If an individual, the applicant has not resided in Michigan for at least 2 years;
  • The required municipal ordinance is not adopted; and
  • The applicant fails to meet other criteria established by rule.

The Board may also consider the following additional criteria under 402(3) to determine if a license should issue:

  • Applicant’s integrity, character, reputation, personal and business honesty, financial ability and experience, and sufficient responsibility or means to operate a facility;
  • Financial ability to obtain required insurance;
  • The sources and amount of capitalization;
  • Prior criminal record (including not just convictions, but charges and expunged records);
  • Prior bankruptcy in past 7 years;
  • Complaints for taxes delinquent for 1 year or more;
  • Regulatory noncompliance;
  • Current business litigation; and
  • Compliance with other standards in rules applicable to the license category.

Qualification for a license under the MMFLA will be a complex process.  It is best to begin now to plan your ownership structures.  It’s never too early to investigate your options.  The information above is a summary.  If there are questions or concerns about precisely what a particular provision requires, the reader must examine the words of the law.

Our next blogs will examine the regulations that will be imposed on a licensee, if and when the license is granted.