Can a creditor, landlord or different third occasion take a safety curiosity in an OLCC license? Can an OLCC licensee collateralize or pledge its license– as if that license had been private property, and never only a permission conferred by the state? These are two sides of a tutorial query we’ve been batting round for years as a result of it has critical, sensible implications. The brief reply is: “sure, an OLCC license could be collateralized.”
Now, what I simply wrote is an unsatisfactory authorized reply, for causes past the scope of this text (suffice it to say that it shouldn’t work). However it could actually and does work regardless. The OLCC agrees. Legal professionals within the Oregon hashish bar additionally agree. Courts… haven’t disagreed. Thus, a few of us hashish attorneys have been securitizing OLCC licenses, and OLCC licensed companies, for years.
The rule at challenge right here is OAR 825-025-1260 (the “Rule”). To paraphrase, the Rule permits OLCC to grant any of the next individuals “non permanent authority” to function a licensed enterprise:
- A trustee
- The receiver of an bancrupt or bankrupt enterprise
- The non-public consultant of a deceased licensee
- An individual holding a [defaulted] safety curiosity within the enterprise
Right here’s the documentation OLCC requires to confer non permanent authority beneath the Rule, per a latest slide presentation from the Fee itself:
- For trustees, receiver or private consultant (“PR”)
- Proof the particular person is the authorized trustee, receiver or PR (courtroom order establishing non-licensee’s rights within the enterprise, authorized entry paperwork, and written request for authority)
- A written request for authority to function because the trustee, receiver, or PR which ought to embody the handle and phone variety of the trustee, receiver or PR
- For secured occasion
- Proof of a safety curiosity within the licensed enterprise
- Proof of the licensee’s default on the secured debt
- Proof of authorized entry to the actual property; and
- A written request for authority to function as a secured occasion which ought to embody the handle and phone variety of the secured occasion
You could have questions at this level. One of many extra compelling is: “what sort of proof of default will OLCC settle for?” The reply is: “a courtroom order is usually required.” In some circumstances, OLCC may additionally settle for a licensee’s acknowledgment of its grant of a safety curiosity and subsequent default. My workplace, working with OLCC, the Oregon Division of Justice and one different regulation agency, was capable of push by the primary of those outdoors of courtroom on that foundation, again in 2019.
Does it matter {that a} courtroom order isn’t a safety curiosity beneath UCC Article 9? Nope. Does is matter that an OLCC licensee can’t switch or “promote” its license with out OLCC approvals? Nope. None of this issues. All that issues is the truth that OLCC presently treats these licenses like private property which could be secured, collateralized, transferred and liquidated for worth. The truth that OLCC isn’t issuing new licenses, but permits the “sale” of current licenses, is in step with this remedy.
I ought to emphasize at this level that the Rule contemplates solely a “non permanent” operational authority by a 3rd occasion. The aim of the Rule is to permit a 3rd occasion to step in and wind up the enterprise, somewhat than run the enterprise indefinitely. Thus, when OLCC points an order beneath the Rule, it offers a regular, 60-day horizon. Extensions are liberally granted, supplied the third occasion can present a passable rationalization of want in every case.
I must also emphasize that the Rule will probably change subsequent yr, along side rulemaking OLCC plans to undertake on associated ideas of “licensability” and license transfers. (Right here, I’m assuming the HB 4016 license issuance moratorium might be prolonged past March 31, 2024.) You may count on to see the Rule constructed out to handle the adjudicated incapacity of a licensee, for starters. However you can even count on critical dialogue in regards to the elementary validity of a rule or observe that enables a celebration to securitize a “license.” At this level, It’s only a query of whether or not the OLCC addresses this earlier than a courtroom does.
For now, take excellent care in drafting your safety agreements, pledge agreements, leases, and many others. An OLCC license is usually a priceless asset. Failing to collateralize that asset within the method that OLCC wish to see might impair the rights and restoration prospects of anybody owed cash by a licensed enterprise.
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