Many folks in the cannabis industry – especially legacy operators – have little to no experience with corporate governance. I don’t mean to say that they don’t know how to run a business; they likely do. What I mean when I refer to corporate governance is the actual process of adhering to governance agreements, getting required votes, papering corporate actions correctly, and so on. This is an issue in a regulated market where operators are essentially forced to contend with organized entities that must be governed appropriately.
Last year, I looked at why corporate governance is important. In that post I talked about some common corporate governance mistakes. Today I want to get into detail on some of the common corporate governance mistakes our cannabis lawyers routinely see in the industry.
#1 Overissuing stock
Entities are formed by submitting documents to a state agency. In California, for example, the filing of articles of incorporation creates a corporation. Depending on the state and entity type, the incorporator or organizer must identify how many shares of stock the company can issue in this initial filing. If the entity wants to issue more stock than the initial filing authorizes, it must amend the
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