Medical marijuana entrepreneurs seeking to start their own “cannabusiness” will likely have to show pretty significant liquid capital or cash assets as a prerequisite to obtaining a license to operate. LARA’s Director of the Bureau of Medical Marihuana Regulation Andrew Brisbo announced LARA’s intended capitalization requirements at 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, which are as follows:
- 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
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 has access to liquid capital in the amounts reflected above based on the applicant’s license interest.
It is important to note that these capitalization requirements have not been finalized by LARA. These proposed capitalization requirements were met with heavy skepticism by some members of the Medical Marihuana Licensing Board, most notably Board Member David LaMontaine. The proposed capitalization requirements were also met with near universal criticism by members of the public who offered their thoughts during the public comments section of the meeting.
Many of the concerns revolved around the fact that the capitalization requirements would make it exceedingly difficult for small businesses to operate in the space. There were also concerns from Board Member LaMontaine and the public that these capitalization requirements could be viewed as a bar or hindrance to licensure for minority applicants. Additional concerns were voiced by Board Member Vivian Pickard who was interested to know whether pharmacies had similar capitalization requirements. When Director Brisbo advised that LARA does not have capitalization requirements for pharmacies, Board Member Pickard expressed skepticism into how LARA formulated and calculated these capitalization requirements. Patients and patient advocates spoke out strongly against the proposed capitalization requirements. Many discussed their personal stories as to how they used medical marijuana to treat their cancer, opioid addiction, or other serious illness.
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 into consideration or whether it holds firm.
Even if LARA eases its capitalization requirements, the application process is still going to be expensive. There will be 3 different application fees that applicants will have to pay to receive a license:
- An application fee of up to $5,000 to be paid the municipality where the business intends to operate;
- An application fee that LARA estimates will be between $4,000 to $8,000 to be paid to LARA; and
- A regulatory assessment fee that LARA estimates will be between $10,000 to $57,000.
Based on these numbers, applicants could potentially have total licensing application costs of $70,000 or more. The licensing costs are in addition to the costs associated with actually opening and operating the business.
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.
An associate attorney with Grewal Law PLLC in Okemos, Michigan, John Fraser focuses on general litigation, criminal defense, cannabis law, and appellate law. John is also an adjunct professor of law at Western Michigan University Cooley Law School where he teaches a course on Medical Marijuana and the Law.