Md. Code Regs. 14.17.06.05

Current through Register Vol. 51, No. 24, December 2, 2024

Section 14.17.06.05 - Management Agreements

A. Definition.

(1) In this regulation, the following term has the meaning indicated.

(2) Term Defined. "Management company" means an entity that provides management services to a licensed entity.

B. A management company shall be:

(1) Approved by the Administration, in a manner prescribed by the Administration; and

(2) In good standing with the State Department of Assessments and Taxation.

C. A licensee shall provide a copy of a management agreement to the Administration and include:

(1) Information detailing any compensation paid in exchange for the management services;

(2) Criminal history record and financial information of the third party providing the management services; and

(3) Any other information relevant to the management agreement requested by the Administration.

D. A management agreement may not take effect unless the Administration has:

(1) Received proper notice of the management agreement, as specified in §C of this regulation;

(2) Received the required fee specified in COMAR 14.17.21; and

(3) Approved the management agreement.

E. The Administration may deny a management agreement:

(1) If the management agreement constitutes an invalid transfer of an ownership interest in a license, as specified in Regulation .04 of this chapter;

(2) If the criminal history record information or the background investigation reveals the personnel of a third party providing the management services has been convicted of or pleaded nolo contendere to a crime involving moral turpitude, whether or not any appeal or other proceeding is pending to have the conviction or plea set aside;

(3) If the management agreement transfers control of a license:

(a) In violation of Alcoholic Beverages and Cannabis Article, §36-503, Annotated Code of Maryland; or

(b) As established in §H of this regulation;

(4) If the licensee fails to produce additional documentation requested by the Administration;

(5) If the management agreement is found to be in violation of §G of this regulation; or

(6) For any other good cause.

F. In the case of material change to a management agreement, including but not limited to a change of ownership or control of the management company, the licensee shall:

(1) Provide any relevant records, files, or information to the Administration; and

(2) Receive Administration approval prior to the material change to the management agreement taking effect.

G. A management agreement under this regulation may not require a licensee to:

(1) Operate the business under a marketing plan or system that is associated with the trademark, service mark, trade name, logotype, advertising, or other commercial symbol that designates the licensee as same or similar to the management company;

(2) Offer, sell, or distribute cannabis or cannabis products under a marketing plan or system prescribed in substantial part by the entity providing the management agreement;

(3) Limit the offerings of cannabis or cannabis products to another licensed entity holding a direct or indirect financial relationship to the management company; or

(4) Sell or transfer ownership interest in the license at a later date to the management company.

H. A management agreement may constitute a transfer of control if it conveys to a management company:

(1) Unilateral control as defined in COMAR 14.17.01; or

(2) The right or authority to make major marketing, production, and financial decisions, including:

(a) The right or authority to operate the business under a trademark, service mark, trade name, logotype, or other commercial symbol that is the same as the management company or another licensee;

(b) The right or authority to purchase a controlling interest in, or control of, the license at a later date; or

(c) The right to or actual payment from the licensee over the course of a calendar year exceeding the greatest of:

(i) 25 percent of the licensee's gross revenue;

(ii) 50 percent of the licensee's net profits; or

(iii) $250,000.

Md. Code Regs. 14.17.06.05

Regulation .05 adopted effective 50:14 Md. R. 559, eff. 7/1/2023 (EMERGENCY); adopted effective 51:14 Md. R. 676, eff. 6/7/2024, exp. 8/31/2024 (Emergency); adopted effective 51:14 Md. R. 678, eff. 7/22/2024.