Introduction to State Cannabis Licensing

Whether you are developing applications for Cannabis Cultivation, Retail, Manufacturing, or Distribution, we have you covered. Not only do we advise on the substance and contents of your application, but we also manage procurement and assembly of all documentation necessary for a complete application and navigate online application portals as required for successful submittals. From formation or restructuring of your business entity, procurement of insurance and bonds, drafting project descriptions, standard operating procedures, and beyond, we offer full-suite cannabis consulting services to secure your licenses in a timely and efficient manner, saving you time and money.

California Department of Cannabis Control (DCC)

The licensing agency for commercial cannabis businesses in California is the Department of Cannabis Control, responsible for the regulation of the following commercial cannabis activities:

• Growing of cannabis plants
• Manufacture of cannabis products
• Transportation and tracking of cannabis goods throughout the state
• Sale of cannabis goods
  Events where cannabis is sold or used
• Labeling of goods sold at retail

While the DCC is the primary agency responsible for approving, denying, suspending, and/or revoking State commercial cannabis business licenses, the compilation of a complete and accurate State license application involves gathering project-specific information and documentation from both private and public agencies to be submitted to the DCC for approval. Such documentation and information may range from simple owner identification credentials and biographical information to complex documentation such as ‘Lake and Streambed Alteration Agreements’ negotiated between the applicant and the California Department of Fish and Wildlife regarding the proximity and potential interaction of a project with waterways and/or protected species.

Certain license applications require the applicant to secure bonds and/or liability insurance for the business applying for licensure. This involves submitting applications and engaging in correspondence with insurance companies and brokers responsible for underwriting and issuing bonds and insurance, which can be time-consuming and challenging for business operators focused on day-to-day operations.

Without exception, each project requires that property diagrams and premises diagrams depicting the specific nature of the proposed operation be developed to DCC’s specification and submitted for the application to be processed. Without specific experience and resources to develop these diagrams efficiently and economically, traditional architects and engineers often require large fees and significant amounts of time to complete these diagrams. At Drivon Consulting, we work with experienced engineers, architects, and draftsmen contracted through our office and provide expert guidance on an affordable basis.

Other agencies outside of DCC from which documentation may be required for applications or maintenance of licensure include the California Regional Water Boards, Employment Development Department, and California Department of Tax and Fee Administration (CDTFA). We interface with all these agencies on behalf of our clients, submitting initial documentation applications, working with agency representatives processing the documentation, and diligently following up to ensure all documentation and information for your license is secured as soon as possible, emphasizing accuracy and attention to detail.

Owner Submittals

As part of any State license application, company owners are required to submit identification and biographical information with disclosure of any prior criminal history and submission of fingerprinting for background checks through the California Department of Justice.

Who Are Considered “Owners” of a Commercial Cannabis Business?

DCC considers the following individuals or entities as cannabis business owners:

• A person with an ownership interest of 20% or more
• A person who manages, directs, or controls operations
• Members of the board of directors of a non-profit or corporation
• General partners in partnerships
• Non-member managers in LLCs
• Trustees and all persons controlling a trust holding a cannabis business
• Corporate officers, presidents, VPs, general managers, or equivalent positions

Financial Interest Holders

In addition to disclosing owners, financial interest holders must also be disclosed during the application process. These include:

• Individuals with less than a 20% ownership interest
• Individuals providing loans to the business
• Individuals entitled to receive 10% or more of profits, including:
  • Employees in profit-sharing agreements
  • Landlords receiving profits
  • Consultants, agents, accountants, attorneys, brokers, salespeople, or IP licensors receiving profits

Restrictions on Cannabis Business Ownership

California restricts certain personnel from holding cannabis licenses, prohibiting common ownership of specific license combinations, and may deny approval of ownership to those convicted of certain crimes. Individuals prohibited from holding cannabis business ownership include:

• State employees
• Public office holders
• Individuals working in state agencies enforcing cannabis regulations

State Evaluation of Criminal History and Ownership Qualifications

Applicants must disclose prior criminal convictions. The State evaluates these disclosures by considering:

• The nature and gravity of the offense
• The number of years since the offense occurred
• The nature and duties related to the particular license

Convictions considered substantially related to licensing qualifications include:

• Serious felony convictions
• Felonies involving fraud, deceit, or embezzlement
• Felonies involving minors and controlled substances
• Drug trafficking felonies with enhancements

Additional Factors for Ownership Determination

A criminal conviction alone does not automatically disqualify applicants, especially for minor offenses. Applicants may submit mitigating documentation and a ‘Statement of Rehabilitation’ to demonstrate fitness for ownership. Factors the State considers include:

• Nature and gravity of the offense
• Relevance of felony cannabis possession convictions
• Applicant’s overall criminal record
• Evidence of compliance with parole, probation, restitution, or other sanctions
• Evidence of dismissal under relevant Penal Code sections
• Evidence of clemency, pardons, or rehabilitation certificates

In case of denial, applicants may request a hearing to challenge the decision.

Expert Cannabis Licensing Advisors

With nearly a decade of experience exclusively serving cannabis business owners and operators, we are your expert advisors for cannabis businesses within California and beyond. This includes securing State license approvals for clients with prior criminal convictions. We don’t judge; we focus on getting the job done!