N.Y. Comp. Codes R. & Regs. tit. 9 § 120.18

Current through Register Vol. 46, No. 36, September 4, 2024

Section 120.18 - Notification and Reporting of Business Changes and Amendments of Licensees

(a) Duty to Report Licensees have an ongoing duty to report changes or amendments to their operations to the Office as required by the Office and these regulations.

(1) Licensees have a continuing duty to provide the Office with up-to-date contact information and shall notify the Office in writing of any amendments or changes to the mailing addresses, phone numbers, electronic mail addresses, and other contact information they provide the Office.

(b) Notification to the Office:

(1) A licensee shall notify the Office within ten (10) business days of becoming aware of or within ten (10) business days of when the licensee should have been aware of any of the following:

(i) where the licensee is a privately held entity:

(a) whenever an existing or new shareholder holds at least 10% aggregate ownership interest, notwithstanding subdivision (d) of this section, requiring Office approval of shareholders who are not passive investors or their spouse;

(b) when a person, other than a shareholder, ceases to be a true party of interest;

(c) when a person changes their aggregate ownership interest to be less than 10%;

(d) when a person lends greater than 10% of a licensee's capital;

(e) upon entering into a contract, term sheet, agreement, or side letter between the applicant, licensee, or its true parties of interest, and a goods and services provider, other than those exempted pursuant to paragraph (1) of subdivision (a) of section 124.3 of this Title, or non-exempt agreements pursuant to paragraph (1) of subdivision (b) of section 124.3 for a flat fee; and

(f) upon the death or removal of a disclosed true party of interest from the license.

(2) A licensee shall notify the Office within three (3) business days of becoming aware of or within three (3) business days of when the licensee should have been aware of any of the following:

(i) criminal convictions, or civil judgments in an amount greater than five thousand dollars ($5,000) against the licensee or its true parties of interest, other than passive investors, in New York State or any other state, federal, or foreign jurisdiction;

(ii) disciplinary action taken against the licensee or its true parties of interest, other than passive investors, by this state or any other state, federal, or foreign jurisdiction, including any pending action;

(iii) the initiation or conclusion of any new judgments, lawsuits, legal proceedings, charges, or government investigations, whether initiated, pending, or concluded, that involve the applicant or its true parties of interest;

(iv) any amendments or changes to the cannabis business operations that are required in regulation and law; and

(v) any proposed material amendments or changes to the cannabis business. Material amendments or changes include, but are not limited to, the following:

(a) amendment or change in processing extraction method(s);

(b) amendment or change in an entity name or doing business as name; any amended or changed name shall comply with all requirements pursuant to Part 128 of this Title; and

(c) a change in the ability to control at least 50% of the voting shares of a licensee.

(3) Failure to provide notifications or reports to the Office pursuant to this section may result in fines and/or suspension, cancellation or revocation of a license.

(c) Request for Office approval:

(1) The following changes require Office approval:

(i) any time a new true party of interest is added to the entity, not including a passive investor or their spouse; or

(ii) changes requiring background checks of the altered parties, which includes any time a new true party of interest is added to the entity, not including a passive investor and their spouse.

(2) Licensees seeking to make a change pursuant to this subdivision, shall submit an application to the Office at least sixty (60) days prior to the proposed date of the amendment or change. Such application shall be accompanied by a fee as determined by the Board. In determining whether to approve such application, the Office may set terms or conditions under which it may allow the continued operation of the license.

(d) Notification and Request for Board approval:

(1) The following changes requires notification to the Board and prior approval:

(i) change the composition of a licensee, including, but not limited to, a transfer in ownership, structure or control;

(ii) the ability to control at least 50% of the voting shares of a licensee; or

(iii) amendment or change to the cannabis business address or a change in the location of a licensee's licensed activities.

(2) Failure to provide notifications to the Board pursuant to this section may result in fines and/or suspension, cancellation, or revocation of a license.

(e) If the licensed premises is damaged by a fire, flood or other natural disaster, or other situations of local, state, or national emergency, or by a security breach, the licensee shall notify the Office within a period of twenty-four (24) hours, and the Office shall have the authority to quarantine all cannabis or cannabis products for analysis and, if appropriate, disposal, if found unfit for use.

(f) Removing a true party of interest from a License. Upon a request to remove a party from a license, such request shall be accompanied by the following:

(1) a notarized letter, signed by both the licensee and the party to be removed, acknowledging the change, and explicitly detailing that the party is aware of the effects of that change;

(2) a corporate resolution of the licensee authorizing the licensee to change the ownership of the licensee pursuant to and consistent with articles of incorporation, LLC agreement, operating agreement, bylaws, partnership agreement, or similar governing document and the laws of the state of formation of the licensee, and an affidavit, of a member of the licensee's board of directors or similar governing body, a managing member, general partner, or sole member, as may be applicable, attesting that the undersigned is authorized to act on behalf of the licensee and that the submission of the change of ownership application based on the corporate resolution constitutes a valid corporate action, or such other evidence reasonably satisfactory to the Office; or

(3) a determination by a court of competent jurisdiction or a decision by an arbiter, agreed upon by both parties.

N.Y. Comp. Codes R. & Regs. Tit. 9 § 120.18

Adopted New York State Register September 27, 2023/Volume XLV, Issue 39, eff. 9/27/2023