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John W. Fraser
John W. Fraser
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Cash Is King: LARA Clarifies Capitalization Requirements for Medical Marijuana Businesses

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Medical marijuana entrepreneurs seeking to start their own “cannabusiness” will have to show fairly significant liquid capital assets as a prerequisite to obtaining a license to operate. We previously covered  the comments from LARA’s Director of the Bureau of Medical Marihuana Regulation Andrew Brisbo from the October 17, 2017 Medical Marihuana Licensing Board Meeting. At the meeting, Director Brisbo announced LARA’s intended capitalization requirements for each type of license and have been confirmed in LARA’s most recent advisory bulletin. LARA’s capitalization requirements for medical marijuana facilities are as follows:

  • Grower
    • Class A (500 plants) – $150,000.00
    • Class B (1,000 plants) – $300,000.00
    • Class C (1,500 plants) – $500,000.00
  • Processor – $300,000.00
  • Provisioning Center – $300,000.00
  • Safety Compliance Facility – $200,000.00
  • Secured Transporter – $200,000.00

Director Brisbo previously used the term “liquid” when referring to these capitalization requirements. However, LARA has provided some much-anticipated guidance in the form of an advisory bulletin. LARA is standing by the capitalization requirements that it previously announced but will only require applicants to show at least 25% of the capitalization amount in liquid assets. Liquid assets are assets that are cash or are easily convertible to cash, such as CD’s, 401k, stocks, and bonds. LARA’s guidance provides clarity for folks interested in applying for a license to operate a medical marijuana facility.

Applicants looking to obtain a license to operate a medical marijuana facility in Michigan will need to provide financial certification from a CPA or other financial professional to demonstrate that the applicant meets LARA’s capitalization requirements.

Patients and patient advocates spoke out strongly against the proposed capitalization requirements at the October Board Meeting. Many discussed their personal stories as to how they used medical marijuana to treat their cancer, opioid addiction, or other serious illness. Several Board members also expressed their own concerns regarding the capitalization requirements.

LARA is set to release a set of emergency rules to govern medical marihuana facilities in Mid-November. We expect these rules to contain the finalized capitalization requirements for applicants. It will be interesting to see whether LARA decides to take the public comments and Board members concerns into consideration or whether it holds firm with its proposed capitalization requirements.

If you are interested in learning more about Michigan’s medical marijuana laws or are interested in applying for a license to operate a medical marijuana facility, contact Grewal Law PLLC today.

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