Status of Colorado HB19-1090: Publicly Licensed Marijuana Companies Bill
By Charles S. Alovisetti, Partner and Sahar Ayinehsazian, Associate Attorney
Jul 16, 2019
On May 29, 2019, Colorado Governor Jared Polis signed HB 1090 into law, which removes certain restrictions on ownership of cannabis businesses and allows public companies to own cannabis business licenses in the state. Although signed, HB 1090 will not go into effect until November 1, 2019. Read a comprehensive summary of HB 1090 here.
Last month, the Colorado Marijuana Enforcement Division (MED) issued an Industry Bulletin to help cannabis industry participants understand opportunities afforded by HB 1090 before it goes into effect. The most important takeaway for eager investors and operators is that any transaction requiring the use of the increased flexibility offered by the new law, including having a public company directly or indirectly own a cannabis business license, can only make use of a non-binding letter of intent without any kind of deposit. Therefore, signing a definitive acquisition agreement now that can only close post-November 1, 2019, as some companies have contemplated, would not be compliant.
Because statutes are often high-level, they create room for questions of how enacted laws will address practical matters in the real world. As such, once a statute is signed into law, relevant regulators usually need to promulgate rules to put the recently enacted statute into effect. In Colorado, this rulemaking process is governed by the Colorado Administrative Procedure Act. Since HB 1090 is going into effect within a short period of time, the process has been accelerated and the first meeting of the dedicated working group already occurred on June 17, 2019.
One of the critical takeaways from the working group’s first meeting is that forms relevant to HB 1090 will not likely be ready until the law goes into effect on November 1, 2019. Investors should expect delays though because it will take some time for the regulators to get accustomed to the new procedures and forms as they simultaneously manage increased deal activity.
The working group’s second and final meeting took place on July 15, 2019, and proposed emergency rules are expected to be finalized by August 1, 2019. The MED will hold a formal public hearing on the permanent rules on October 15, 2019.
Vicente Sederberg will provide a more detailed analysis of the impact of the new law once the permanent rules are announced in August. Meanwhile, given that the final rules will impact deal structures and timelines, cannabis industry participants should pay close attention as the rulemaking for HB 1090 progresses.
This article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.