Bradley Arant Boult Cummings LLP

Alabama became the 36th state to allow cannabis for medical use when Gov. Kay Ivey signed into law the Darren Wesley ‘Ato’ Hall Compassion Act on May 17, 2021. The act establishes a process through which applicants will compete for a limited number of licenses in the following categories: (1) cultivator; (2) processor; (3) dispensary; and (4) “integrated facility” (which can cultivate, process, transport, and dispense medical cannabis under one license), as well as a to-be-determined number of licenses for secure transporters and testing laboratories. A 14-member Medical Cannabis Commission licenses and regulates the medical cannabis program, with input from the Alabama Department of Agriculture and Industries on cultivation matters. The act requires that the Commission and the department adopt regulations that allow license applications by September 1, 2022.

This article provides an overview of the requirements for obtaining a cultivator license, and is part of a series of similar overviews for the other five license categories.

What is a cultivator license?

A cultivator license authorizes the licensee to: (1) cultivate cannabis; (2) sell or transfer cannabis to a processor; and (3) sell or transfer medical cannabis to a dispensary if the cultivator contracts with a processor to process its cannabis into medical cannabis on the cultivator’s behalf.

How many cultivator licenses will be issued?

The act authorizes the Department of Agriculture to issue no more than 12 cultivator licenses. At least three licenses must be awarded to a business entity that is 51%+ owned by individuals of “African American, Native American, Asian, or Hispanic descent,” and “managed and controlled” by such individuals “in its daily operations.”

What are the requirements for obtaining a cultivator license?

Applicants for a cultivator license must pay a non-refundable application fee of $2,500. Each “owner, shareholder, director, [and] board member” of an applicant, along with each “individual with an economic interest in an applicant,” must submit to a “state and national criminal background check.” If any “owner, director, board member, or individual with a controlling interest” has been “convicted of or released from incarceration for [any] felony” or “convicted of a controlled substance-related felony” within the last 10 years, the applicant is ineligible for a license.

The act requires that applicants include a bevy of information in their applications, including:

  • The identity of all individuals with “direct or indirect ownership interests” in the applicant.
  • The identity of entities that are involved in the cannabis industry and related to the applicant or individuals with an ownership interest in the applicant.
  • A complete criminal history of the applicant’s owners, directors, board members, and controlling shareholders.
  • The applicant’s anticipated or actual number of employees.
  • “Financial information” in the “manner and form” required by the Commission.
  • Records indicating “that a majority of ownership is attributable to an individual or individuals with proof of [Alabama] residence … for a continuous period of no less than 15 years preceding the application date.”
  • Records indicating “that a majority ownership is attributable to an individual or individuals … with cumulative business experience in the field of commercial horticulture or agronomic production for a period of at least 15 years.”

Under the act, licensees must maintain at least $2 million in “liability and casualty insurance” coverage, and the Commission may promulgate regulations that “establish minimum levels of other financial guarantees” that licensees must maintain. If an applicant fails to demonstrate its ability to meet these requirements, it cannot receive a license.

The act lists numerous criteria the Commission may use to evaluate license applications, including:

  • The applicant’s “ability to capitalize and conduct operations as proposed in its business plan, including business experience in related fields.”
  • Several other criteria aimed at the applicant’s financial backing and business acumen.
  • Any history of non-compliance with any regulatory requirements.
  • That the applicant’s “proposed location[s] of all proposed medical cannabis facilities” are “suitable for all activities” and “not inconsistent with applicable zoning.”
  • The applicant’s “ability to serve an identifiable geographic area.”

Before issuing a license, the Commission must open a 30-day period during which anyone can submit “written comments regarding the applicant,” and the Commission is required to consider all comments received. If an applicant is denied a license, it can request that the Commission “provide a public investigative hearing at which the applicant is given the opportunity to present testimony and evidence to establish its suitability for a license.” The Commission must provide such a hearing upon request.

Each applicant (for all license types) must certify in its application that it “does not have an economic interest in any other [Alabama medical cannabis] license.” Licenses and ownership interests in licensed entities cannot be transferred absent approval by the Commission.

Originally Published To JD Supra Platform: https://www.jdsupra.com/legalnews/applying-for-a-license-to-cultivate-3276244/