Since the beginning of 2016, the MED has required companies to submit a Permitted Economic Interest Application (PEI) for all individuals that contribute funds or services to a licensed marijuana business if the contribution can be converted to ownership at some point in the future. Examples of these include unsecured convertible debt instruments, option agreements, warrants, etc. We’ve heard there is a great deal of confusion surrounding the Permitted Economic Interest application process, so today’s post helps shed some light on this process.
The 15 page Permitted Economic Interest application resembles an Associated Key Application; however, a PEI application is required for each applicable MED license. If your business has many licenses, we’re talking about a lot of paper!
First, here’s what needs to be submitted for each Permitted Economic Interest application:
1) Single Sided Permitted Economic Interest application (DR 8555) updated 12/15/2016
2) “TAX CHECK AUTHORIZATION AND REQUEST TO RELEASE INFORMATION” form released by MED in January 2017
3) If thePermitted Economic Interest applicant has a spouse, the applicant must obtain notarized signatures from his or her spouse authorizing the approval to release tax information
4) List of marijuana licenses (in Colorado or otherwise) linked to the applicant whether they were granted or not
5) Detailed criminal history
6) If the applicant has been party to any lawsuit, a list of these lawsuits must be included
7) Any applicable information surrounding involved trust instruments
8) Executed agreement including loan paperwork and or promissory notes related to the business demonstrating a financial interest and or unsecured convertible debt instrument, option agreements, warrants, etc.
9) Verification of fingerprints. Please note: fingerprints must be taken by a law enforcement agency. Fingerprints taken by a third party will not be accepted. The fingerprints must be on an FBI fingerprint card in order to be accepted by MED.
10) Tax returns are not required but may be requested during the applicant’s background investigation.
Clearly, this is a complex and detailed application process. As such, we want to help address a few frequently asked questions:
Page 3 of 15 #2: If the applicant answered yes to any of the questions listed in #2, then the applicant must obtain official documents form the court where the applicant appeared and provide the outcome of the case. Every arrest, summons, charge, or conviction and lawsuit, no matter how seemingly inconsequential, must be disclosed. Failure to disclose such matters may be grounds for denial of thePermitted Economic Interest application. In addition, any arrests or matters that have been sealed or expunged must also be disclosed.
Page 3 of 15 #4: If the applicant has been party to a lawsuit, include a spreadsheet that details the following information:
· List of business names
· Indicate if the applicant has or was sued personally (or otherwise)
· In addition, any civil legal proceedings must be reported. Historically, applicants have been denied for not disclosing minor civil matters so be sure to be thorough!
Page 6 of 15 #4: If trust instruments are involved with this application, include a spread that details the following:
· List of Trusts
· List the beneficiary and trustee
· Indicate if any of the trust’s funds will be used for funding the contribution.
· If the trust involves anyone under the age of 18, then the trust cannot be used as a funding source.
Be sure to include all applicable financial documentation tied to the applicable loan, warrant, option, etc. Moreover, be sure to specify exactly how any applicable proceeds were obtained and if the the proceeds equate to indirect ownership.
As with all of our blog posts, please refer to this list as a general guide. As the MED continues to improve its processes, forms and requirements are almost certainly subject to change. Here is the most recent form for the Permitted Economic Interest at the time of this post; however, as aforementioned, it is subject to change so please check the MED site for the most up-to-date application.
This is a complicated new component of MED licensing, and it is critical to remaining in compliance with all applicable rules and statutes. Drop us a line at email@example.com if we can help answer further questions on this topic!
Yours in compliance,