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California Cannabis Investing: Understanding ‘Ownership’ And ‘Financial Interests’

California’s lack of a residency requirement has made it popular for people looking to invest in cannabis., but do you know the rules?

Passage of California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA“) has opened the doors to institutional investing in California cannabis companies. California’s lack of a residency requirement for investors and its relatively limited investor disclosure and background requirements have made it popular for institutional investors looking to invest in cannabis.

There are two main types of California cannabis applicants: owners and financial interest holders. To be legally considered an “owner” under California’s cannabis regulations, one does not actually need equity in the applicant’s cannabis business. “Owner” means any of the following:

  1. A person with an aggregate ownership interest of 20 percent or more in the person applying for a license or a licensee, unless the interest is solely a security, lien, encumbrance;  
  2. The chief executive officer of a nonprofit or other entity;
  3. A member of the board of directors of a nonprofit; and
  4. Any individual who will be participating in the direction, control, or management of the person applying for a license.

An individual who directs, controls, or manages the business includes any of the following: a partner of a commercial cannabis business that is organized as a partnership; a member of a limited liability company of a commercial cannabis business that is organized as a limited liability company; and an officer or director of a commercial cannabis business that is organized as a corporation.

To Read The Rest Of This Article By Hilary Bricken on Above The Law

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