Can a creditor, landlord or different third celebration 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 quick reply is: “sure, an OLCC license might 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 may well and does work regardless. The OLCC agrees. Attorneys within the Oregon hashish bar additionally agree. Courts… haven’t disagreed. Thus, a few of us hashish legal professionals 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 “momentary 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 momentary authority beneath the Rule, per a latest slide presentation from the Fee itself:
- For trustees, receiver or private consultant (“PR”)
- Proof the individual is the authorized trustee, receiver or PR (court docket 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 embrace the deal with and phone variety of the trustee, receiver or PR
- For secured celebration
- 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 celebration which ought to embrace the deal with and phone variety of the secured celebration
You will 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 court docket order is often 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 legislation agency, was in a position to push by the primary of those exterior of court docket on that foundation, again in 2019.
Does it matter {that a} court docket order isn’t a safety curiosity beneath UCC Article 9? Nope. Does is matter that an OLCC licensee can not 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 might be secured, collateralized, transferred and liquidated for worth. The truth that OLCC isn’t issuing new licenses, but permits the “sale” of present licenses, is in keeping with this remedy.
I ought to emphasize at this level that the Rule contemplates solely a “momentary” operational authority by a 3rd celebration. The aim of the Rule is to permit a 3rd celebration to step in and wind up the enterprise, reasonably than run the enterprise indefinitely. Thus, when OLCC points an order beneath the Rule, it offers an ordinary, 60-day horizon. Extensions are liberally granted, supplied the third celebration can present a passable rationalization of want in every case.
I must also emphasize that the Rule will possible change subsequent 12 months, at the side of rulemaking OLCC plans to undertake on associated ideas of “licensability” and license transfers. (Right here, I’m assuming the HB 4016 license issuance moratorium will likely be prolonged past March 31, 2024.) You possibly can count on to see the Rule constructed out to handle the adjudicated incapacity of a licensee, for starters. However it’s also possible to count on critical dialogue concerning the elementary validity of a rule or apply that permits 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 court docket does.
For now, take excellent care in drafting your safety agreements, pledge agreements, leases, and so on. An OLCC license generally is a worthwhile 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 Oregon hashish enterprise.
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