We have been helping people buy and sell Oregon cannabis businesses since the early days of the adult use market. Most of these sales are relatively simple asset purchase agreements—including many for naked licenses—but some have been stock sales. Others have taken place amid administrative enforcement action by the Oregon Liquor and Cannabis Commission (OLCC).
This is the second of two posts on mistakes we commonly see in Oregon cannabis business sales. Last week, I covered lazy diligence, sleeping on inventory, services agreements and unclear deadlines. Today I have five more hazards for you: sale structure, landlord issues, local issues, earnest money and escrow issues.
Sale structure (asset or stock sale agreement)
Story time. We represented a minority shareholder in a sale recently where the company agreed to an asset sale (total liquidation) of an OLCC licensed vertical out of a C-corp. When alerted to the potential tax impact, the selling attorneys reasoned the C-corp “wasn’t well managed and there were outstanding liabilities.” It seems that no consideration was given to what could be accomplished in a standard, pre-close window, as well as standard options for closing conditions, indemnity escrows, promissory note offset rights for the buyer, and other types
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