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With the cannabis regulatory environment changing at a rapid pace it is more important than ever to conduct proper due diligence with any potential transaction. Each state promulgates its own rules and regulations for cannabis and hemp operations, and as such, industry participants must understand these differences to confirm compliance. Proper due diligence will help ensure any potential transaction goes smoothly and expeditiously.
Charles Alovisetti, partner at Vicente Sederberg LLP and chair of the firm's Corporate Practice Group and Elliot Choi, counsel at Vicente Sederberg LLP and managing attorney of the firm’s New York office will lead a discussion addressing due diligence in the cannabis industry, and will cover the following topics:
- Deal structure: What constitutes a change of control? Are restrictions on the number of licenses applicable? What can be pledged as collateral? Using alternative structures such as management agreements and profit sharing arrangements.
- Status of licenses/operations: What are you buying (i.e., an entity that has applied for a license, provisional license holder, a licensed entity with no operations, or a fully operational business)?
- Compliance: Is the company in compliance? What are the potential liabilities? Different requirements for cultivators, processors and dispensaries.
- Banking issues: Does the company have a transparent banking relationship? Is it accepting large cash payments. Banking represents one of the most significant operational issues for cannabis companies.
- Hemp and CBD operations: Are hemp/CBD operations separate from cannabis? Different regulatory regimes, including applicable federal law for hemp/CBD.
- 280E exposure: Is the company subject to 280E and has it been properly filing its taxes? What’s the exposure for a new buyer? 280E can represent the source of the largest liabilities for cannabis companies.
- Unique jurisdictional concerns: Does your deal require notice, pre-approval, a new application or no action with regulators?
Program Level: Overview
Intended Audience: In-house counsel, outside attorneys, board members, corporate officers, compliance officers, finance, accountant and other allied professionals involved in the cannabis industry
Advanced Preparation: None