One question California marijuana lawyers have been getting from existing medical marijuana operators is "how can I sell my medical marijuana collective?" The question has arisen since the passing of the Medical Cannabis Regulation and Safety Act ("MCRSA") and Proposition 64.
Not many medical marijuana collectives are hard-pressed to find willing buyers. In cities like the Los Angeles, only 135 Proposition D-compliant dispensary collectives are allowed to exist, where buyers line up and try to buy LA dispensaries that can get them into that market. Buyer interests are similarly seen in other California collectives that seem to demonstrate continuous operation and good standing with their local jurisdictions to qualify for "priority status" under both the MCRSA and Prop. 64.
But here comes the big issue - neither the MCRSA nor Prop. 64 repealed Proposition 215 and Senate Bill 420, which together make up California's present, very vague medical marijuana laws. According to Canna Law Group, this means all medical marijuana collectives must still operate as non-profit entities until and unless the application period opens up for licenses under the MCRSA or Prop. 64.
The word "collective" derived from the medical marijuana collective in itself, is an industry term of art and is not a specific type of California legal entity that can be found in the California Corporations Code. According to Above The Law, the California Attorney General's interprets it as the law that forbids the sale of medical marijuana for profit, which means only "non-profit operation" would be allowed in the event qualified patients were to "collectively or cooperatively" cultivate and distribute medical cannabis to other qualified patients.
Having said that, the bottom line is that non-profit collectives cannot be purchased, and it requires good bylaws to be able to transition from one group of directors to another. Therefore, if medical marijuana operators are looking to "sell" or "buy" a California cannabis business, the relevant bylaws need to be convincingly allowed for such a change, so that the medical marijuana collective may not find itself in direct violation of California's Corporations Code and face a painful lawsuit.
