RMR: WHAT DREW YOU TO WORK FOR CULTIVA LAW?

Mio Asami: It’s funny, actually. I stumbled upon Cultiva Law after obtaining my California bar license when I grabbed coffee with the lead transactional attorney of the Seattle Office, Fabiola Jimenez. After that coffee meeting, I got a call from Aaron who was looking for a California-licensed attorney, and the rest is history.

With Aaron’s extensive experience with cannabis law, coupled with the carefully curated team of attorneys we have on deck, there really is no better place to work when in the cannabis legal realm. The chemistry and comradery between each team member is second to none. We all share the same passion for helping our clients realize their visions. We all uplift each other, as well. It’s rare to find such fun and badass firm.

RMR: FAVORITE THING ABOUT PRACTICING LAW?

Mio Asami: Creative problem-solving. Cannabis is still such a new industry after decades of prohibition. We, whether as a business owner, recreational/medicinal participant, or ancillary service provider, are all navigating a world of unknowns amidst strict regulations that even the lawmakers don’t know exactly how to regulate just yet.

Not many are familiar with the fact that cannabis is extremely strictly regulated, more so than any other industry.

A business deal that wouldn’t run into any compliance issues in a separate industry likely runs into ownership or financial interest holder issues when dealing with a cannabis business. This means that, almost on a daily basis, we have to find ways to make that deal work for our clients within the confines of compliance regulations.

Where clients have come to us after other attorneys told them, “It can’t be done,” it feels great to be able to really build a relationship with the client and work together with them to find ways to make it work.

RMR: YOU’VE HANDLED MANY CASES WITH CULTIVA. ANY CASES THAT COME TO MIND AS PARTICULARLY NOTEWORTHY?

Mio Asami: Amidst all the successful cases, one of the most memorable for me is actually a case in Oregon involving a client growing hemp, the result of which was less than ideal. The client had a spectacular smokable hemp flower product; it had high CBD content and perfectly compliant levels of THC. That is, until the regulations in Oregon changed which, without explicitly banning smokable hemp, effectively banned smokable hemp flower through its testing requirements. Seemingly overnight, the client was now sitting on an entire harvest of great hemp that could no longer be sold as a smokable. It was heartbreaking to have to tell the client this.

It was one of the biggest examples not only of how volatile this industry really is, but also how important my role is to the client’s success. The regulations are constantly changing, so it’s important that I update my clients whenever I can so they can maintain their compliance and continue toward success. This case sits in the back of my mind in almost everything I do.

RMR: WHERE DO YOU SEE THIS INDUSTRY IN 5 YEARS?

Mio Asami: Federal legalization!

That’s the hope. If I can buy a Pink Lady apple grown Washington at a market in California, I should be great to be able to do the same with cannabis. Especially with four more states legalizing recreational cannabis in the most recent election, clearly, legalization is the general trend. Though federal legalization will undeniably shake the industry as well—we see this with hemp.

On the business side, I truly believe this industry has endless possibilities. I mean, the plant itself has endless possibilities, each of those possibilities brings business opportunities. It’s still well in its infancy stages, so in five years, I think both the industry and the regulations will have matured to a level that allows for more complex corporate deals and less barriers to entry.

One of the biggest barriers to entry that I’ve seen is funding. Ownership and Financial Interest Holder disclosure and background check regulations prevent many potential investors from financing business that could successfully expand with those funds. But again, these regulations could (and hopefully will) change.

For example, Washington State, until recently, required an investigation into even the spouse of an owner or investor, even if that spouse had nothing to do with the cannabis business. Those regulations have changed, so in five years’ time, California may rid itself of some of these regulatory barriers to entry.

RMR: WHAT SHOULD COMPANIES PAY ATTENTION TO DURING A MERGER/ACQUISITION?

Mio Asami: When dealing with an M&A in California, companies absolutely need to pay attention to the ownership transfer regulations. If there’s a complete buyout (all previous owners are leaving the company), the regulations state that the business may not continue operation until the new owners (the buyers) have all been approved by the Bureau of Cannabis Control (“BCC”). Depending on the processing times, this could mean weeks or months of accumulating losses from paying rent and/or utilities while twiddling your thumbs waiting for approval.

On the other hand, if at least one previous owner remains an owner (that is, maintains at least 20% ownership interest in the company), the business will be able to maintain its operations while the BCC approves the new owners. Some are calling this the “80/20 rule” because the seller maintains 20% while the new owners take on 80% of the business.

The 80/20 is a much more common method to take when dealing with an M&A in California because the idea of ceasing operations to wait for the BCC is risky for the business. But this method comes with other things to consider:

Both parties want to be sure that closing the deal is contingent upon the new owners obtaining approval, this language should be clearly laid out in the agreement;Ensure language in the agreement that properly secures the new owner’s ability to buyout the remaining 20% after obtaining approval to prevent any squatting on that ownership interest; and

Remember, there is always the possibility that the deal won’t go through for whatever reason, especially when the deal depends on a determination by an unrelated third party like the BCC—be sure to pay attention to the avenues of recovery, if any, to make sure proper protections are put in place; and

Overbroad non-compete provisions in agreements that may prevent other opportunities for either party.

Biases aside, I think it’s always best to have an attorney review these agreements because it’s our job to pursue our client’s best interests and will likely prevent costly future disputes.

For more information, visit Cultiva Law’s website here.