Registered Marijuana Dispensaries Becoming For-Profit Entities: A Strong Possibility

One of the most perplexing – and quite frankly for folks trying to make a buck in the medical cannabis space, frustrating – components of the regulatory framework for Massachusetts RMDs is that they must be not-for-profit corporations under Chapter 180 of General Laws. DPH has adopted guidance that is explicit: there can be no profit sharing between the not-for-profit licensee and for-profit related parties.

Now, this may be a thing of the past. Both the House and Senate bills that are actively being considered have similar language that allow any RMD that holds a provisional or final certificate of registration from the Department of Public Health to convert from a non-profit to a for-profit business corporation or other similar entity. Two-thirds of the Board of the non-profit must vote to authorize the conversion, and the conversion must be done consistent with nuanced procedures set forth in Massachusetts General Corporate Law. Also, the House bill and a Senate amendment propose to do away with the requirement that medical marijuana dispensaries be non-profit.

Converting from a non-profit to a for-profit company is not authorized in the Commonwealth, but moving to a for-profit entity is not without precedent. Non-profit conversion is an accepted practice in many states.

There will be many legal, governance, and financial considerations to take into account as part of the conversion. Notwithstanding the complexity, we expect the dozens of provisional and final license holders to take advantage of the opportunity for conversion, if ultimately included in the final legislation. The  language regarding conversion in the proposed legislation is so detailed that it is unlikely that the Cannabis Control Commission will want to consider regulations about conversion so entities may want to start converting as soon as possible.

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