DCR Accepting Ownership Change Requests for Non-Retail Cannabusinesses

Posted by Margolin & Lawrence on January 7, 2020

DCR NOW ACCEPTING OWNERSHIP CHANGES (1)

The Department of Cannabis Regulation (DCR) has just confirmed that it is now processing requests for ownership changes to existing Phase 2 (non-retail) cannabis licenses in Los Angeles. This long-awaited news is a game-changer for savvy investors and license holders alike, as it opens opportunities to buy or sell shares of the 139 cultivation, manufacturing, and distribution businesses that are licensed under Phase 2 in Los Angeles.  

 

Since Phase 2 licensing was first opened by the city in August of 2018, the DCR has only considered ownership changes under limited circumstances. Potential investors who did not apply for a Phase 2 license upfront have not been able to enter the Los Angeles cannabis market by buying shares of an existing business for most of the past year and a half. Instead, many of these investors have been waiting for the city to roll out Phase 3 retail licensing, which allows for several individuals to apply for a license collectively as a corporate entity. The City of Los Angeles hosted its first round of Phase 3 applications and selected 100 applicants to move on to the next part of licensing. However, recent allegations of the city’s misconduct have led to an immediate pause of the Phase 3 licensing process, and those applicants will not be able to move forward until (if at all) a comprehensive audit report is released. The new possibility for investors to enter the Los Angeles market by buying into an existing Phase 2 (non-retail) business comes as especially good news to interested entrepreneurs in light of the recent Phase 3 misfortunes. The change also behooves current Phase 2 license holders by providing them with access to more opportunities for capital investment.

 

As of October 24, 2019, an additional 360 Phase 2 applications were “pending” and under review. It is likely that many of these applicants will too receive a license to operate, adding to the 139 active Phase 2 (non-retail) businesses in the city. As the number of Phase 2 licenses grows, so will the opportunities for investment. It is unclear if the DCR will allow ownership changes indefinitely or for a limited period of time. Now is a prime time for investors and licensees alike to expand their business opportunities.

 

Margolin & Lawrence represents many of the current Phase 2 license holders in Los Angeles as well as applicants who are still pending review. In our years of experience mitigating cannabusiness ownership transactions throughout the state, we have grown a strong network of licensees and interested investors.

 

If you are interested in buying part of a Phase 2 non-retail license or if you own a Phase 2 license and are looking to sell part of your business, contact one of our attorneys today!

 

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.