The More You Know

I still get calls daily from people who want to get into the
Colorado cannabis industry. Most of them do not have a clue as to what it
entails and that is why they are calling me, to find out what to do and what
the opportunities are. Well, let me share with you a very excellent starting
point you can locate on your own without having to pay a lawyer. If you go to
the Colorado Department of Revenue website (colorado.gov/revenue),
and click on “Enforcement,” then click on “Marijuana,” you will be taken to a page
with a plethora of information on legal cannabis in Colorado. The centerpiece
of that page is the regulations. I encourage you to e-mail the regulations to
Staples or FedEx and have them print them out for you and bind them. It’s very
inexpensive, and doing so will give you a really nifty handbook that can give you
great up-to-date information on the legal cannabis business rules in Colorado. There
is a page for both retail cannabis and medical cannabis.

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I tell you this because knowledge is power and “the more you
know,” really rings true here. That is what cannabis lawyers do. They keep up,
in part, with the continuous updating of regulations from the Marijuana
Enforcement Division (MED). Whereas statutes are created and updated annually
when the Colorado legislature convenes, these regulations give us the day-to-day
rules we need to know in setting up and running a cannabis business, updating as
needed through out the year.

One topic that is asked about frequently is the role of
investors in our Colorado cannabis businesses. An investor is different from an
owner, and you can be an investor but if you are, you cannot have any control
over the business. The usual arrangement is that you provide the cash, either
up front or on an agreed upon basis, and the cannabis business owner signs a
Promissory Note saying you will be repaid a certain amount, at set times, at a
set interest rate. You cannot use any cannabis business related collateral;
maybe a personal house, but usually they are Promissory Notes without
collateral.

Another kind of Promissory Note is the Convertible
Promissory Note. This is one where an out-of-state investor would like to one
day own a portion of the Colorado cannabis business and he or she does not
qualify as an owner because they live out of state and the law states that you
must be a Colorado resident, and meet all of the requirements, in order to be
an owner of a cannabis business. The Convertible portion of the Promissory Note
is that the equity can “convert” to an ownership interest so long as certain
MED criteria are met. Pretty cool, huh?

Lastly, there are people living out-of-country who also want
to participate in investing in this Colorado industry. That is being taken into
consideration by the MED and an answer should appear soon on the horizon saying
if this will be allowed.