Public Comment Period Now Open for CA Proposed Emergency Rules
On September 15, the public comment period opened to provide feedback on the Department of Cannabis Control’s (“DCC”) recently released proposed emergency regulations. The Office of Administrative Law’s (“OAL”) 10-day review period will close Monday September 20, so it is imperative that all industry stakeholders participate and submit their comments before the review period closes.
While some of the proposed changes are minor, such as amending the required forms to DCC letterhead for application licensing without any real significant substantive changes on application requirements. Other proposed changes, some identified below, will have significant impacts on licensees if approved as is:
Ownership and Financial Interest Holder Definitions
Section 15003(a)(1) now clearly defines “aggregate” to mean “the total ownership interest held through an entity. For example, an individual owning 50% of an entity that owns 50% of the cannabis business would have a 25% aggregate ownership interest in the cannabis business.” Licensees and potential licensees can now use this formula to calculate aggregate percentages to determine who has an aggregate interest of at least 20% and thus must be disclosed as an owner to the DCC.
Section 15003(a)(2)(E) now requires anyone with “authority to provide strategic direction and oversight for the overall operations of the commercial cannabis business” to be disclosed as an owner. The current version of this rule already expressly includes disclosure of directors and officers as owners, but new added language also includes general managers as owners that must be disclosed.
Section 15003(a)(2)(E) now requires anyone with “authority to execute contracts on behalf of the commercial cannabis business.” This is excessive as now any junior employee who signs a contract (i.e. sales invoice) on behalf of the cannabis business would need to be disclosed as an owner.
Section 15004(a)(4) now requires any individual who is entitled to receive at least 10% of the profits to be disclosed as a financial interest holder. The current rule requires financial interest holder disclosure for any percentage of profits.
Section 15004(b)(4) excludes any individual who holds less than 10% of shares in either a public or private company from disclosure as a financial interest holder. The current rule sets the disclosure threshold at 5% and only applies to public companies.
Provisional Licensing for Cultivation Expansion on Contiguous Premises
Section 15011.1 now reiterates the language in the passed 2021 Trailer Bill, which prohibits the issuance of provisional licenses for applications received on or after January 1, 2022 if issuance of the license would cause the licensee to hold multiple cultivation licenses on a contiguous, connecting premises to exceed the 1 acre of total canopy for outdoor cultivation, or 22,000 square feet for mixed-light or indoor cultivation. This rules clarifies that “a premises will be considered contiguous if they are connected, touching, or adjoining.” This means that cultivators located on a contiguous parcel wishing to expand beyond the limits stated above must submit complete applications before the end of the year to qualify for provisional licensing.
Trade Samples
Section 15041.2 now authorizes licensees to provide trade samples to each other for inspection or consumption to aid in purchase making decisions. All trade samples must be in their final form, must be clearly labeled as “TRADE SAMPLE. NOT FOR RESALE OR DONATION.” and recorded in METRC.
Section 15041.4 excludes cannabis event organizers, distributor transport only licensees, and testing laboratories from receiving or sending trade samples.
To submit a comment on the proposed emergency regulations, you must submit a written comment to both the OAL and DCC with “DCC Emergency Commercial Cannabis Regulations” in your subject line.
To view the proposed regulatory text and support documents see the links below:
Forms: DCC-LIC-025 (Repealed), DCC-LIC-026 (Repealed), DCC-LIC-015, DCC-LIC-016, DCC-LIC-017, DCC-LIC-018, DCC-LIC-020, DCC-LIC-021, DCC-LIC-022, DCC-LIC-023, DCC-LIC-024, DCC-LIC-027, DCC-LIC-028, DCC-LIC-029
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