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Michigan’s Marijuana Regulatory Agency Releases New Medical Marijuana Facilities License Applications: What to Know

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Michigan’s Marijuana Regulatory Agency Releases New Medical Marijuana Facilities License Applications: What to Know

The State of Michigan’s newly created Marijuana Regulatory Agency (“MRA”) has released its new Medical Marijuana Facilities License application forms and instructions, formally replacing the application process previously administered by the now dissolved Bureau of Medical Marihuana Regulation. In large part, the application process and the forms themselves remain much like the old, but now reflect recent changes to the Medical Marijuana Facilities Licensing Act (“MMFLA”) in effort to make the licensing process more streamlined and conducive to publicly traded companies, and remove inapplicable inquiries related to temporary operations under the previous “emergency rules.” The remaining changes are stylistic cleanups emphasizing the underlying requirement of truthfulness, provide separate forms for entities or individuals, and a streamlined application submission process. Applications remain a two-step process of submitting for prequalification (“Step 1”) and facility licensure (“Step 2”).

The “big picture” changes to the application include: (1) the elimination of the confusing “true party of interest” concept previously used, which attempted to identify all conceivable direct and indirect interest holders in the applicant; (2) the addition of a distinction for public companies, who are now only required to list stockholders of greater than 10% and managerial employees; (3) the lessened requirement that an applicant produce financial account records and statements only for the last twelve months instead of the last three years; and (4) the elimination of the requirement that an applicant certify to and demonstrate Michigan residency for a minimum of two continuous years prior to the submission of the application; out of state applicants must, instead, provide documentation of approval to conduct business transactions in Michigan at the time of submitting the application.

The recent amendments to the MMFLA significantly reduce the burden placed on applicants who are public companies by eliminating the “true party of interest” disclosure requirement. While the previous application required an applicant to disclose any “person who holds any direct or indirect ownership interest in the applicant,” the amended application only requires the applicant entity to disclose its ownership, including submitting an individual application for each of its: (1) stockholders with an ownership interest of greater than 10% and directors or officers, if a public or private corporation; (2) general partners with an ownership interest of greater than 10%, if a limited partnership or limited liability partnership; and (3) members or managers with an ownership interest of greater than 10%, if a limited liability company. The spouses, if any, of each of those listed in any of the above categories must also be disclosed along with a supplemental application. Applicants entities which are already public companies must also disclose all stockholders holding a direct or indirect interest of greater than 5% who have not otherwise been disclosed elsewhere in the application. This change makes it more practicable for public companies to participate in the ownership of licensed medical marijuana facilities in Michigan by significantly reducing the disclosure and background check burdens on passive equity holders. Privately held corporations must still disclose all of their stockholders.

Another notable change is the reduced amount of required supporting documentation. First, while the previous application required an applicant to provide all banking information, including the applicable statements for all financial accounts, for a three year period prior to applying for the license, the amended application only requires the provision of such information for the prior twelve months. Second, the “base questions” asked as part of sole proprietor or individual supplemental applications no longer requests descriptive information regarding caregiver history, patients, or temporary operations of facilities. Instead, two forms are now located under the supplemental individual application for responses related to (1) business interests and (2) marijuana associations. Answers must be provided on the provided form, and duplicate pages may be used as necessary to provide full and complete disclosures. Third, applicants no longer must provide the deed for listed real estate unless such real estate is being used as part of meeting the capitalization requirement.

The required criminal history disclosures have also been revised. Now, traffic violations do not need to be disclosed. This change clarifies some of the past confusion whether traffic violations that amounted to misdemeanors in other states had to be disclosed even if they did not correspond with a similar violation in Michigan or involve a controlled substance. Applicants must still disclose any indictments, charges, arrests, convictions, or guilty or no contest pleas concerning any felony offense, or any misdemeanor involving a controlled substance, dishonest, theft, or fraud, regardless of if it has been reversed, expunged, pardoned, etc. Applicants must also disclose if they have been found responsible for violating a local ordinance in any state involving a controlled substance, dishonesty, theft, or fraud that substantially corresponds to a misdemeanor in that state. Last, applicants must disclose all arrests, charges, indictments, convictions, no contest pleas, forfeiture of bail concerning an offense, criminal record expungements, or incarcerations. Supporting information for any disclosure is required to include: the date, arresting agency, name and location of the court, case caption, case or docket number, and the disposition relating to the disclosure. For charges, dismissals, convictions, or expungements, evidence of such event is required such as a Register of Actions. Parole or probation records are also required if applicable.

Practical changes have also been made. For example, for clarity sake, separate application forms are tailored specifically for entities or sole proprietors and individuals. Applicants can easily specify the number of licenses being applied for by each category type under a single application. Individual facility applications are still required for separately licensed facilities. Further, a single notarized signature page now replaces the individual notarization pages for Attestations: A – (Acknowledgement, Agreement, & Consent); B – (Authorization to Release Information); C – (Verification & Affidavit of Disclosure); D – (Person Completing Application); and F – (Acknowledgement of Federal Law & Release of Liability). Entities may now include an organization chart showing entity structure and managerial employees, but may not reference other business documents to describe the entity.

One important item to remember is that, while all applicants, and any individual or entity providing sources of capitalization to the applicant, are still required to provide a CPA attestation that the applicant meets its applicable capitalization requirement, the CPA attestation is no longer listed on the application checklist. Instead, the CPA attestation is to be included as a supporting document to the required financial information disclosures. The mortgage statement, in addition to the deed, must also be included for any mortgaged property used to meet the capitalization requirement.

Step 2 facility licensure applications remain much the same with some minor changes. For instance, applicants must now indicate if the facility is ready for inspection by the MRA and the Bureau of Fire Services. Applicants also must provide the date that notice to the municipality informing them of the intent to submit an application to the MRA was sent via Certified Mail. In addition to the name and phone number of the municipal clerk carrying out the municipal requirements, applications now must include the clerk’s email address. Additionally, a notarized attestation must be provided from the insurance or bonding company attesting that the insurance or bond issued is in compliance with Sec. 408 of the MMFLA, signed by both the insurance or bonding company and the applicant. Applicants are no longer required to submit an estimated gross annual income for the facility.

Procedurally, all applications must now be submitted as one file with a separate single file of supporting documents. Applications contents must be submitted in the same order as provided in the accompanying checklist, and may no longer include separately titled divider pages. Specifically created addendum pages for each applicable section must be used as needed to fully and completely make all required disclosures. In person submissions are still accepted, but those choosing to do so may no longer include: USB drives, binders, binder clips, staples, containers, or folders of any kind. The MRA has indicated that they will still accept applications on the old forms for those who have already begun an application, but no specific date has been set for when old forms will no longer be accepted.

As always, stay tuned as the process continues to develop. And as the application instructions themselves suggest, be sure to consult an attorney if you have any questions about the substance of any attestation, disclosure requirement, or provision of the application.