Business to Business Licensing and Investment Considerations in California

Much has been discussed about BCC Section 5032, which requires licensed cannabis operators to only conduct cannabis activity with other licensed cannabis operators and eliminates the ability of manufacturers to white label products for unlicensed brands.

The BCC stated the purpose is to understand who has an ownership stake in licensed cannabis companies.

What are the business implications of Section 5032 for licensed operators in 2019?

We sat down with Nicole Laggner, an Attorney at Clark Neubert LLP, who is based in Santa Cruz, to talk about a range of business topics, including Section 5032, structuring deals between licensed operators and IP owners, M&A deal terms between California operators and the acquisition hungry public CannaCo’s, and raising capital for small companies.

5032. Commercial Cannabis Activity Between Licensees

(a) All commercial cannabis activity shall be conducted between licensees. Retail licensees may conduct commercial cannabis activity with customers in accordance with chapter 3 of this division.

(b) Beginning July 1, 2018, A-licensees shall only conduct business with A-licensees and Mlicensees shall only conduct business with M-licensees, except for testing laboratories.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26001, 26013 and 26053, Business and Professions Code.


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