Destigmatizing and legalizing cannabis are certainly positives for the industry, but it’s not just an increase in retail sales fueling the sector’s boom.
The entrance of big money into the industry certainly provides a solid jumping-off point for businesses that partner with investors to increase profitability and valuation.
Without your unique skill, product, process or experience—whatever forms the base of the business and sets it apart from competitors—the investment opportunity wouldn’t exist in the first place.
That’s why it’s essential to put the terms of the business relationship on paper early, so expectations are clear and there are no misunderstandings or surprises in the future.
Finding a business-savvy lawyer to represent your interests can be critical early in the process, especially when dealing with outside investors or venture capitalists.
An operating agreement, sometimes called a shareholder or partnership agreement, is an essential document that defines members’ rights and lays out a framework of operations for events that could render parties in the business unable to continue working together.
If you’re a cannabis industry veteran, you more than likely have expertise on the product itself—whether growing it, selling it, studying it, or manufacturing secondary products like concentrates and edibles.
Remember to take advantage of the leverage you hold as a cornerstone of the business by including provisions in the operating agreement that protect your rights and stake in the company.
If, for example, you are one of several minority shareholders who share ownership with an angel investor who owns 65% of the company, delineating decisions that require a supermajority vote ensures the angel investor can’t commandeer the business or make decisions that inequitably benefit him or her over the minority shareholders.
If a majority shareholder decides to sell his or her shares, tag-along rights give minority shareholders the right to join the transaction and sell their shares along with the majority shareholder at the same price.
Drag-along rights prevent minority shareholders from blocking the sale of a company, but also entitle them to the same terms of sale and conditions as the majority shareholder.
For example, if a majority shareholder wants to buy out your 15% ownership in a company, but you believe those shares will be worth more in the future, a pre-negotiated valuation equation can determine how much your shares might be worth down the line.
In some cases, the operating agreement will dictate that minority shareholders receive their shares in the company on a vesting schedule, meaning the shareholder does not fully realize the full rights and benefits of the shares until certain conditions are met, such as remaining with the business for a certain period of time.
“Cliff vesting,” where a larger percentage of shares vest all at once after a longer period of time , requires the shareholder to stay at the company for a set time period before he or she will fully realize his or her shareholder rights.
To protect against this scenario, minority shareholders should consider including a provision setting forth that if the minority member is pushed out of the operation of the business, his or her shares will continue to vest on schedule so long as he or she was terminated without cause or separated for good reason.
“Cause” is typically a defined term in the agreement and will often include “bad” behavior such as: the conviction of a felony, a breach of fiduciary duty, misconduct causing harm to the company or willful failure to perform substantial duties.
Remember that the efficacy of the protective measures laid out here depend on the negotiated terms in the operating agreement.
CARLSBAD, Calif., April 28, 2021—PRESS RELEASE—Vessel Brand, a community-led company focused on uplifting the cannabis consumption experience, announced a new partnership with GAIACA Waste Revitalization in an effort to combat the ongoing waste issue facing the cannabis vape industry.
Thoughtfully designed with the user experience top-of-mind, Vessel batteries power any oil in style with optimized airflow technology, low-temperature settings and extra-long battery life.
Together, Vessel and GAIACA are committed to addressing the environmental concerns as they pertain to the cannabis vape industry, and this recycling program is an integral step.
The plaintiffs in that case argued that the measure violates the state’s one-subject rule and does not simply amend the state constitution but, rather, revises the constitution.
The defendants, who represent South Dakotans for Better Marijuana Laws, the group behind Amendment A, argued the measure contains one subject—cannabis—to which all provisions are essentially related.
“It is designed to shield the people from legislation, from crafty legislators, who before the legislation passes, they’ll insert … something that the people weren’t expecting,” Johnson said.
“It’s about the rule of law, and it’s about enforcing the limitations that the people placed on their ballot initiative under the constitution.
She asked about what she called the “far-reaching implications” of the article in regard to the state’s department of revenue’s “exclusive power” to enforce certain lawful functions, such as appropriating tax revenue gained through the implementation of an adult-use cannabis program.
“Of course, the number of provisions has always been less important than what the provisions themselves do,” Johnson said.
“That is not revolutionary, in all due respect to opposing counsel,” he said.
In a rebuttal, Prostrollo said that delegation of power as written in the article is not simple but is unique as it applies to South Dakota.
The entire case being argued in front of the Supreme Court on April 28 stemmed from Miller and Pennington County Sheriff Kevin Thom, who filed a lawsuit Nov.
“Under our current constitution, we have three branches of government that are afforded specific delegated powers,” she said.
“You’ve got this issue with, ‘We don’t think that this is properly in front of the voters, and we want to challenge it.
“Thankfully, the legislature has now addressed that, so it won’t be a problem moving forward,” she said.
While it’s clear that voters can change the constitution when they want to, and when they follow the rules, the substantive legality of Amendment A is not an issue, Salter said from behind the bench.
Going back to the one-subject rule, Johnson said it’s OK for voters to have multiple reasons for supporting a ballot initiative—such as voting in favor of legalizing adult-use cannabis and ensuring access to medicinal cannabis—on the same ticket.
Richard Nelson sponsored the bill, which passed in a 7-5 vote after an “impassioned” debate on April 27, The Advocate reported.
Nelson said he believes the state’s cannabis prohibition is a failed experiment and needs to end, according to The Advocate.
It must get approved by the Republican-dominated full House and Senate and Democratic Gov.
Less than a month after voters approved the ballot measure with a 54.2% majority, Pennington County Sheriff Kevin Thom and South Dakota Highway Patrol Col.
Commenting on the litigation, National Organization for the Reform of Marijuana Laws Deputy Director Paul Armentano said: “Legalization opponents cannot succeed in the court of public opinion or at the ballot box.
7, arguing that the case should be dismissed because voiding Amendment A would overturn the people’s will.
In that order, Noem said, “The initiative process used to place Constitutional Amendment A on the ballot was not proper and violated the procedures set forth in the South Dakota Constitution.” Also, in that order, Noem said she instructed Miller to file the litigation against Amendment A on her behalf.
In the conclusion of her ruling, Klinger said, “Amendment A is unconstitutional as it includes multiple subjects in violation of Article XXIII, and it is therefore void and has no effect.