A sweeping expansion in the New Jersey’s cannabis retail ownership has been given a nod by the state’s legislature. The move, following the passage of A4151, will allow individuals, including current licensees, to possess up to a 35% equity stake in a maximum of seven different class 5 retail licenses.
Previous regulations from the New Jersey Cannabis Regulatory Commission limited a single owner possessing 5% or more equity in a cannabis license from holding ownership in any other cannabis license. The restrictions also curtailed entities from owning more than one class 5 license, barring horizontal growth along a license class tier.
Once signed by the governor, the law will substantially broaden these limitations. It permits the 35% equity holder to offer loans and license intellectual property to the same license holders, given the terms are “commercially reasonable.”
The proposed changes specifically target diversely owned retailers, including certified women-owned, minority-owned, and disabled-veteran businesses. It excludes social equity, impact zone, bonus point, and general license applicants and license holders.
Certain stipulations have been clearly defined, such as the repayment term for loans exceeding $500,000, which must span no less than 10 years. However, other provisions, such as determining “commercially reasonable” terms, are up for interpretation by regulators.
The bill maintains the 35% ownership cap, which cannot be exceeded even in the event of a default. Still, an alternative ownership group that satisfies those certified special license qualifications can be substituted.
Regulators maintained the ability to withhold license approvals or changes in ownership if it deems any terms to be commercially unreasonable, according to Michael McQueeny, partner at Foley Hoag LLP. Current commission regulations already outline a basic framework for commercial unreasonableness or unfair advantage, such as profit percentages, maximum interest rates, and other undue control factors.