On July 12, 2021, the California Department of Cannabis Control (“DCC”) was born.
Before the DCC, cannabis business owners and licensees had to check and comply with regulations from the Bureau of Cannabis Control, CalCannabis Cultivation Licensing Division, and the Manufactured Cannabis Safety Branch. Through Assembly Bill 141, however, Governor Gavin Newson consolidated the three different California state cannabis regulatory agencies into one.
On September 15, 2021, the DCC filed proposed emergency regulations to consolidate three different sets of regulations into one, which went live on September 27, 2021. Here are a few notable changes:
- An “Owner” includes a person with an aggregate ownership interest of 20 percent or more in the commercial cannabis business. The term aggregate is now defined to mean the total ownership interest held by a single person through any combination of individually held ownership interests in a commercial cannabis business and ownership interests in an entity that has an ownership interest in the same commercial cannabis business. In other words, if a person owns 15% of the stock in a commercial cannabis business and 50% of the stock in an entity that owns 10% of the stock in the same commercial cannabis business, that person has 20% of aggregate ownership interest, and thus would be categorized as an “Owner” of the commercial cannabis business. As one could imagine, this calculation could get complicated for larger or publicly traded companies.
- If a person has less than 20 percent of ownership interest, the applicant or licensee might still need to disclose that person as a financial interest holder. Previously, a person holding less than 5% is not considered a financial interest holder. Now, the DCC bumped the threshold up. A person who holds less than 10% of total shares in a publicly or privately held company are not considered financial interest holders.
- For a commercial cannabis business with 20 or more employees, the applicant shall provide either a notarized statement that it will enter into or demonstrate it has already entered into and abide by the terms of a labor peace agreement. Now, even for commercial cannabis businesses with less than 20 employees, the applicant must provide a notarized statement indicating that the applicant will enter into and abide by the terms of a labor peace agreement within 60 days of employing its 20th employee.
When making disclosures to the DCC, make sure that you are using the most updated forms, which can be found here and here.
The emergency regulations that are on the DCC’s website now only include sections that were changed during the emergency rulemaking. Sections that are not included in the document were not changed and remain in effect. The DCC plans to release the full, complete set of regulations this week, so stay tuned. Even though this is still a relatively new regime, it is anticipated that this will significantly reduce the cost and time of compliance for cannabis business owners.