On April 20, my colleague Hilary Bricken wrote a post entitled, “Cannabis Collections Headaches and What to Do.” In it, she discussed a problem that’s been plaguing California cannabis businesses throughout: distributors and retailers that don’t pay their bills. Towards the end of the article, she mentioned a piece of proposed legislation to address the problem, AB 766, which would allow – and even require – the state to police cannabis contracts. While I’m in favor of coming up with ways to fix the status quo, this isn’t it. If passed, AB 766 would in my view lead to massive problems, both for licensees and the state. Let’s unpack.
What AB 766 would do
AB 766 would apply only to sales made after January 1, 2024. It would require any licensee to pay for goods and services from another licensee within 15 calendar days after the date of the final invoice. The date set forth on the invoice could not be more than 30 days after the date goods or services are transferred. So hypothetically, if a cannabis contract has net 30 payment terms and is paid 46 days after delivery, problems begin.
Licensees that sell goods with a value
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