State Clarifies “Applicants” for Marijuana Licensure
The Michigan legislature has given further guidance to individuals and businesses interested in obtaining a license for or participating in a new marijuana business. Public Act 3 of 2019, signed into law in April 2019, has clarified the confusion over who is considered an “Applicant” for application disclosure purposes on MMFLA applications submitted after the beginning of 2019.
Only “applicants,” as defined by Michigan’s Medical Marijuana Facilities Licensing Act (MMFLA), must provide disclosures to the state in an application for a state marijuana operating license. Who is considered an “Applicant”, and therefore must submit to the application process, is in large part dependent on the type of business entity that will hold the medical marijuana license and the extent that a person will have an ability to control or participate in the management of the licensed entity.
A person who could control and direct the affairs of or make policy concerning a marijuana licensee is a manager for purposes of application disclosure. People who merely carry out the policies of marijuana licensees are not considered “Applicants” regardless of their title. In other words, a person with the job title of “manager” or “supervisor” who does not have the ability to make policy or control the affairs of a marijuana licensee is not considered to be an Applicant for disclosure purposes.
Following is how Public Act 3 defines “Applicant” in some common entity types available for licensure in Michigan:
Individual or Sole Proprietorship
- The proprietor and spouse.
Corporations – Private & Public
- Corporate officers and their spouses;
- Persons with equivalent titles to corporate officers and their spouses;
- Directors and their spouses; and
- Stockholders holding a direct or indirect ownership interest greater than 10% and their spouses.
Limited Liability Corporations
- All members with a direct or indirect ownership interest of greater than 10% and their spouses;
- All managers with a direct or indirect ownership interest of greater than 10% and their spouses;
- All members with a direct or indirect ownership interest of 10% or less who exercise control over or participate in the management of the company and their spouses; and
- All managers with a direct or indirect ownership interest of 10% or less who exercise control over or participate in the management of the company and their spouses.
Partnerships & Limited Liability Partnerships
- All partners and their spouses;
- All general partners and their spouses;
- All limited partners with a direct or indirect ownership interest of greater than 10% and their spouses; and
- All limited partners with a direct or indirect ownership interest of 10% or less who exercise control over or participate in the management of the partnership and their spouses.
Multilevel Enterprise
- Any entity that receives or has the right to receive more than 10% of the gross or net profit from the enterprise during any full or partial calendar or fiscal year.
- Any person that receives or has the right to receive more than 10% of the gross or net profit from the enterprise during any full or partial calendar or fiscal year.
Nonprofit Corporation
- All entities with membership or shareholder rights in accordance with the articles of incorporation or the bylaws and their spouses.
- All individuals with membership or shareholder rights in accordance with the articles of incorporation or the bylaws and their spouses.
It is important to accurately determine whether a person exercises control over or participates in the management of a marijuana entity. This determination guides whether an application is required for disclosure purposes. Strong standard operating procedures (SOPs) and other clearly written marijuana operational policies protect employees and investors from becoming unintended applicants.
Foley, Baron, Metzger & Juip offers comprehensive assistance to those seeking licensure under the Marihuana Facilities Licensing Act, as well as compliance with local medical marihuana regulations. We also advise clients on related matters, including business formation, land use, environmental compliance, facilities siting and related issues. Contact attorneys Richard Baron or Daniel Cortez for more information at 734.742.1800.