This document is not legal advice. It is meant to highlight operational changes for any transfers of ownership or control.
Here’s some commentary (as posted on Linked In) by
Document “transfers of ownership or control” : Guidance provided by Maryland Cannabis Administration (MCA) to assist cannabis licensees comply with State laws and regulations governing the cannabis industry.
A secured creditor may be approved by the Administration to obtain a security interest in the proceeds from an Administration-approved sale of a grower, processor, or dispensary license. The secured creditor may select an eligible receiver to oversee the orderly transfer of the license if the licensee (1) is the subject of an order requiring appointment of a receiver; (2) becomes insolvent; or (3) otherwise materially beaches or defaults on its material obligations secured by the associated license. Both the secured creditor and the receiver must submit an application in the form specified by the Administration and, if approved, a detailed plan for the disposition of the license.
COMAR Section 14.17.17.01(B)(2) still limits the definition of a secured creditor to “a lending institution defined under Financial Institutions Article, § 1-101, Annotated Code of Maryland, that has been approved by the Administration to obtain a security interest in the proceeds from an Administration -approved sale of a grower, processor, or dispensary license.”
The revised emergency regulations do not address several important issues concerning creditor rights and Maryland cannabis companies, such as:
(1) How can a lender who is not a bona fide “lending institution” obtain an enforceable security interest in a Maryland cannabis company’s non-license assets?
(2) Are parties required to seek the MCA’s approval of its secured creditor status prior to signing a security agreement or only upon seeking to transfer control of or title to the cannabis license?
(3) For parties seeking recognition as a “secured creditor” under the above-noted COMAR sections, what is the MCA’s application form and process?
These unresolved questions may discourage lenders from supporting new Maryland cannabis companies in search of financing. New market entrants must demonstrate adequate capitalization within six months after receiving a conditional license.