LARA Releases Advisory Bulletin Regarding Licensee Capitalization Requirements

Media Contact: LARA Communications 517-373-9280
Emal: mediainfo@michigan.gov

November 8, 2017 – The Dept. of Licensing and Regulatory Affairs (LARA) released an advisory bulletin today to inform and advise potential licensees of the Bureau of Medical Marihuana Regulation’s (BMMR) intention regarding licensee capitalization requirements. The bulletin is for advisory purposes only and is subject to change.

As permitted by the Michigan Medical Marihuana Facilities Licensing Act, the Medical Marihuana Licensing Board – when determining whether to grant an applicant a license – may consider the sources, and total amount, of the applicant’s capitalization to operate and maintain the proposed marihuana facility.

“By allowing current medical marihuana inventory and start-up equipment – as well as 401k accounts, CDs, and other common investments – to count towards a potential licensee’s capitalization requirements, we have taken the necessary steps to ensure that businesses of all sizes will be represented in Michigan’s burgeoning medical marihuana industry,” said BMMR Director Andrew Brisbo. “Capitalization standards are an important part of the regulatory structure that will help ensure both business stability and safe, reliable access to medical marihuana for patients. These requirements were developed after researching other Michigan industries and best practices from states with medical marihuana regulation.”

BMMR has determined that at least 25% of an applicant’s capitalization sources must be in liquid assets. Liquid assets are easily convertible to cash and may include:

  • Cash, including checking or savings accounts
  • Marihuana and marihuana-infused product inventory (in compliance with the Michigan Medical Marihuana Act, 2008 IL 1 or administrative rules)
  • Certificates of deposit, 401k accounts, stocks, and bonds

The remaining capitalization may be evidenced in either additional liquid assets or in non-liquid assets. Evidence must be provided that shows there is no lien or encumbrance on the asset provided as a source of capitalization. Examples of non-liquid assets include but are not limited to:

  • Equity in real property
  • Supplies, equipment and fixtures

In order to be granted a proposed medical marihuana facility license, applicants will be required to demonstrate capitalization amounts as follows:

  • Grower: Class A – $150,000
  • Grower: Class B – $300,000
  • Grower: Class C – $500,000
  • Processor – $300,000
  • Provisioning Center – $300,000
  • Secure Transporter – $200,000
  • Safety Compliance Facility – $200,000

An applicant for a medical marihuana facility license may be an individual, a corporation, an LLC, a partnership, a limited partnership, an LLP, an LLLP, a trust, or other legal entity. Additionally, the capitalization amounts and sources must be validated by CPA-attested financial statements.

This bulletin does not constitute legal advice and is subject to change. It is intended to be advisory only, in anticipation of the Department of Licensing and Regulatory Affairs’ promulgation of emergency rules consistent with statutory requirements. Potential licensees are encouraged to seek legal counsel to ensure their licensure applications and operations comply with the Medical Marihuana Facilities Licensing Act and associated administrative rules.

For more information on BMMR, please visit: www.michigan.gov/bmmr

For more information about LARA, please visit www.michigan.gov/lara
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