HF 5273

as introduced - 93rd Legislature (2023 - 2024) Posted on 04/04/2024 02:52pm

A bill for an act
relating to cannabis; establishing requirements for ownership of cannabis
businesses; establishing disclosure requirements for financing cannabis businesses;
proposing coding for new law in Minnesota Statutes, chapter 342.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [342.185] TRUE PARTY OF INTEREST.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) As used in this section, the following terms have the
meanings given.
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new text begin (b) "Control" means the power to independently order or direct the management,
managers, or policies of a licensed business.
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new text begin (c) "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 Commerce.
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new text begin (d) "Financier" means any person or entity that:
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new text begin (1) is not a financial institution or government entity;
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new text begin (2) provides money as a gift, grant, or loan to an applicant for a cannabis business license,
a cannabis business, or both; and
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new text begin (3) expects to be paid back, with or without reasonable interest.
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new text begin (e) "Gross profit" means sales minus the cost of goods sold.
new text end

new text begin (f) "Revenue" means the income generated from the sale of goods and services associated
with the main operations of a business before any costs or expenses are deducted.
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new text begin (g) "True party of interest" means:
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new text begin (1) for a sole proprietorship, the sole proprietor;
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new text begin (2) for a general partnership, all partners;
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new text begin (3) for a limited partnership, limited liability partnership, or limited liability limited
partnership, all general partners and limited partners;
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new text begin (4) for a limited liability company, all limited liability company members and managers;
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new text begin (5) for a privately held corporation, all corporate officers and directors or persons with
equivalent titles and all stockholders;
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new text begin (6) for multilevel ownership structures, all persons and entities that make up the
ownership structure;
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new text begin (7) for any entity or person with a right to receive revenue, gross profit or net profit or
exercise control over a licensed business; any entity or person with the right to receive some
or all of the revenue, gross profit, or net profit from a licensed business during any full or
partial calendar or fiscal year; and any entity or person who exercises control over a licensed
business; and
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new text begin (8) for a nonprofit corporation, all individuals and entities with membership rights in
accordance with the provisions of the articles of incorporation or bylaws.
new text end

new text begin True party of interest does not include:
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new text begin (1) 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 office may investigate all funds
associated with the landlord to determine if a financier relationship exists. The office may
also investigate a landlord in situations in which a rental payment has been waived or
deferred;
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new text begin (2) a person who receives a bonus or commission based on the person's sales, so long
as the commission does not exceed ten percent of the person's sales in any given bonus or
commission period. Commission-based compensation agreements must be in writing;
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new text begin (3) a person or entity contracting with a licensee to receive a commission for the sale of
a business or real property;
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new text begin (4) a consultant receiving a flat or hourly rate compensation under a written contractual
agreement;
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new text begin (5) 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 a licensed business or a business that is applying for a license;
new text end

new text begin (6) any business or individual with a contract or agreement for services with a licensed
business, such as a branding or staffing company, as long as the licensee retains the right
to and controls the business; or
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new text begin (7) a financial institution.
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new text begin Subd. 2. new text end

new text begin Limitation on married couples. new text end

new text begin A married couple may not be a true party of
interest in more than one cannabis microbusiness, one cannabis mezzobusiness, five cannabis
retailer businesses, three cannabis cultivator businesses, or three cannabis manufacturer
businesses. The limitations in section 342.18, subdivision 2, apply to a married couple as
if the licenses were held by a single entity.
new text end

new text begin Subd. 3. new text end

new text begin Notification. new text end

new text begin Except as otherwise provided in this subdivision, a cannabis
business has a continuing duty to disclose the source of all money that will be invested in
the business, including but not limited to all money obtained from financiers, before investing
the money in the licensed business. The notice requirement under this section does not apply
to:
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new text begin (1) revenues of a licensed cannabis business that are reinvested in the business;
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new text begin (2) proceeds of a revolving loan if the loan has been approved by the office within the
three previous years, unless the source of the money has changed or the approved loan
amount has increased; and
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new text begin (3) if the source of the money is an identified true party of interest on the license, a
previously approved financier associated with the license, or a previously approved revolving
loan, the office must allow the money to be used upon receipt of an application to use the
money. The office must then investigate the source of the money. If the office cannot verify
the source of the money after reasonable inquiry, or the office determines that the money
was obtained in a manner in violation of the law, the office may take actions consistent with
the provisions of this chapter.
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new text begin Subd. 4. new text end

new text begin Disclosure agreements and intellectual property. new text end

new text begin A cannabis business must
not enter into an intellectual property agreement with another cannabis business if a single
entity could not hold licenses for both types of cannabis business.
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new text begin Subd. 5. new text end

new text begin Financiers. new text end

new text begin (a) A financier may not receive an ownership interest, control of
a 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 money, unless the financier, if
directly involved in the loaning of money, receives office approval and has qualified on the
license as a true party of interest.
new text end

new text begin (b) The office must conduct a financial and criminal background investigation on all
financiers.
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