Illinois’ deadline for cannabis dispensary license applications came up on January 2, 2020, making some applicants wonder if and how they might be able to transfer a license once it’s obtained. Though the bill has some ambiguities (discussed later in this post), the Cannabis Regulation and Tax Act (HB 1438) does provide some guidance for how this process works for a dispensing organization — including how to add or remove principal officers, how the sale of a dispensing organization works, and how the process affects Social Equity Qualified license holders in particular.
Changing License Ownership Requires Department Approval
Licenses are issued to the specific dispensing organization that is granted the cannabis license, whose principal officers are identified and approved during the application process. Changing those owners and officers in any way requires the notification and participation of the Illinois Department of Financial and Professional Regulation, which oversees adult-use cannabis in the State. The addition of new principal officers, for example, requires approval by the Department, approval that is contingent upon the applicant’s commitment to upholding the community engagement plan submitted with the original application. Per 410 ILCS 705/15-20(d)(1-5), this commitment requires fulfilling one of the social equity plans as laid out in HB 1438. This could be:
- a contribution of 3% of a year of sales or $100,000 (whichever is less) to either the Cannabis Business Development Fund (CBDF) or a Public Community College Act cannabis training program;
- a donation of $100,000 or more towards a job training program in a Disproportionately Impacted Area;
- participation a cannabis business establishment incubator program as approved by the Department of Commerce and Economic Opportunity; or
- participating in a 2-year interest-free loan-granting program for social equity applicants, wherein the loan must be at least $200,000.
In addition to approving new principal officers, the Department must also be notified within 5 days of a principal officer’s departure from an organization. Based on the addition or removal of principal officers, the Department will review the ownership structure to determine whether they consider the change of ownership to be a transfer of the license (more on this in a minute).
Similarly, the sale of a dispensing organization requires approval of the Department and a request submitted on Department-provided application forms. The form submission includes a $5,000 change-of-ownership fee, applications for each new principal officer, and proof that the transfer of ownership will not grant any of the new owners or principal officers ownership or control of more than 10 adult use dispensing organization licenses. All of these requirements are outlined in 410 ILCS 705/15-60 and its subsections.