Current through Register Vol. 24-18, September 15, 2024
A cannabis license must be issued in the name(s) of the true
party(ies) of interest. The board may conduct an investigation of any true
party of interest who exercises control over the applicant's business
operations. This may include financial and criminal background
investigations.
(1)
True parties
of interest. True parties of interest must qualify to be listed on the
license, and meet residency requirements consistent with this chapter. For
purposes of this title, "true party of interest" means:
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Entity
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True party(ies) of
interest
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Sole proprietorship
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Sole proprietor
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General partnership
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All partners
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Limited partnership, limited liability partnership, or
limited liability limited partnership
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All general partners
All limited partners
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Limited liability company (LLC)
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All LLC members
All LLC managers
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Privately held corporation
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All corporate officers and directors (or persons with
equivalent title) All stockholders
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Multilevel ownership structures
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All persons and entities that make up the ownership
structure
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Any entity(ies) or person(s) with a right to receive
revenue, gross profit, or net profit, or exercising control over a licensed
business
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Any entity(ies) or person(s) with a right to receive
some or all of the revenue, gross profit, or net profit from the licensed
business during any full or partial calendar or fiscal year
Any entity(ies) or person(s) who exercise(s) control
over the licensed business
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Nonprofit corporations
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All individuals and entities having membership rights
in accordance with the provisions of the articles of incorporation or
bylaws
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(2) A
married couple may not be a true party of interest in more than five retail
cannabis licenses, more than three producer licenses, or more than three
processor licenses. A married couple may not be a true party of interest in a
cannabis retailer license and a cannabis producer license or a cannabis
retailer license and a cannabis processor license.
(3) The following definitions apply to this
chapter unless the context clearly indicates otherwise:
(a) "Control" means the power to
independently order, or direct the management, managers, or policies of a
licensed business.
(b) "Financial
institution" means any bank, mutual savings bank, consumer loan company, credit
union, savings and loan association, trust company, or other lending
institution under the jurisdiction of the department of financial
institutions.
(c) "Gross profit"
means sales minus the cost of goods sold.
(d) "Net profit" means profits minus all
other expenses of the business.
(e)
"Revenue" means the income generated from the sale of goods and services
associated with the main operations of business before any costs or expenses
are deducted.
(4) For
purposes of this chapter, "true party of interest" does not include (this is a
nonexclusive list):
(a) A person or entity
receiving payment for rent on a fixed basis under a lease or rental agreement.
Notwithstanding, if there is a common ownership interest between the applicant
or licensee, and the entity that owns the real property, the board may
investigate all funds associated with the landlord to determine if a financier
relationship exists. The board may also investigate a landlord in situations
where a rental payment has been waived or deferred.
(b) A person who receives a bonus or
commission based on their sales, so long as the commission does not exceed 10
percent of their sales in any given bonus or commission period.
Commission-based compensation agreements must be in writing.
(c) A person or entity contracting with the
licensee(s) to receive a commission for the sale of the business or real
property.
(d) A consultant
receiving a flat or hourly rate compensation under a written contractual
agreement.
(e) A person with an
option to purchase the applied for or licensed business, so long as no money
has been paid to the licensee under an option contract or agreement for the
purchase or sale of the licensed business, or a business that is applying for a
license.
(f) Any business or
individual with a contract or agreement for services with a licensed business,
such as a branding or staffing company, will not be considered a true party of
interest, as long as the licensee retains the right to and controls the
business.
(g) A financial
institution.
(5)
Notification.
(a) Except as
provided in this subsection (4)(a)(i), (ii), and (iii), after licensure the
licensee must continue to disclose the source of all funds to be invested in
the licensed business, including all funds obtained from financiers, prior to
investing the funds into the licensed business.
(i) Revenues of the licensed cannabis
business that are reinvested in the business do not require notification or
vetting by the board.
(ii) Proceeds
of a revolving loan where such loan has been approved by the board within the
three previous years do not need to be vetted by the board, unless the source
of the funds has changed or the approved loan amount has increased.
(iii) If the source of funds is an identified
true party of interest on the license, or a previously approved financier
associated with the license, or a previously approved revolving loan, the board
will allow these funds to be used upon receipt of an application to use such
funds. The board will then investigate the source of funds. If the board cannot
verify the source of funds after reasonable inquiry, or the board determines
that the funds were obtained in a manner in violation of the law, the board may
take actions consistent with the provisions of this chapter.
(b) Licensees must receive board
approval before making any ownership changes consistent with WAC
314-55-120.
(c) Noncompliance with the requirements of
this section may result in action consistent with this chapter.
(6)
Disclosure agreements
and intellectual property.
(a)
Licensed cannabis businesses may enter into agreements consistent with the
provisions of
RCW
69.50.395.
(b) Notwithstanding the foregoing, no
producer or processors may enter into an intellectual property agreement with a
retailer.
(7)
Financiers.
(a) Consistent with
WAC
314-55-010(11),
a financier is any person or entity, other than a financial institution or a
government entity, that provides money as a gift, a grant, or loans money to an
applicant, business, or both, and expects to be paid back the amount of the
loan, with or without reasonable interest.
(b) A financier may not receive an ownership
interest, control of the business, a share of revenue, gross profits or net
profits, a profit sharing interest, or a percentage of the profits in exchange
for a loan or gift of funds, unless the financier, if directly involved in the
loaning of funds, receives board approval and has qualified on the license as a
true party of interest.
(c)
Washington state residency requirements do not apply to financiers who are not
also a true party of interest, but all financiers must reside within the United
States.
(d) The board will conduct
a financial and criminal background investigation on all financiers.
Statutory Authority:
RCW
69.50.325,
69.50.331,
69.50.342,
69.50.345. WSR 13-21-104,
§ 314-55-035, filed 10/21/13, effective 11/21/13. WSR 13-21-003,
§ 314-55-035, filed 10/3/2013, effective
11/3/2013
