The purpose of this bulletin is to provide guidance to Office of Cannabis’ (OOC) grantees about OOC’s efforts to redistribute unspent grant funds. This bulletin discusses grantee eligibility, documentation requirements, and eligible expense categories.
The Office of Cannabis ("OOC") issues this Bulletin to clarify the impact of Equity Applicants’ proportionate ownership interest right under Section 1604(b) on contract provisions addressing forced sales of equity Cannabis Businesses.
Pursuant to Section 1604(b) of the San Francisco Police Code, an Equity Applicant’s “‘ownership interest’ in the corporate Applicant shall include a right […] proportionate to the interest held, to vote on fundamental decisions relating to the business.” This provision prohibits the owners and/or managers of a Cannabis Business that is applying for a permit in connection with an Equity Applicant or has received a permit in connection with an Equity Applicant from imposing certain limits on the ownership rights of the Equity Applicant.
“Drag-along” or “forced sale” provisions in corporate governance agreements are contract terms that force minority shareholders to join in the sale of a company when specified conditions are met. A “drag-along” or “forced sale” provision in a cannabis business’s operating agreement or other governance document that purports to require an Equity Applicant to participate in a sale would violate the Equity Applicant’s “right … proportionate to the interest held, to vote on fundamental decisions relating to the business,” and would therefore violate Section 1604(b) of the Police Code.
Posted 06/02/2023