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As discussed a few days ago, the purchase of marijuana will not happen within a few days, and the transaction will fall apart for various reasons. part 1 The focus of this blog series is on buyers of cannabis M&A transactions.in part 2, We paid attention to the regulatory environment and discussed the concepts that first-time homebuyers and their lawyers should pay attention to. In Part 3, we looked at the things you should consider when hiring your cannabis lawyer.
Why hire a lawyer?
While representing clients in the cannabis industry, I learned that, compared with clients in other industries (such as our international practices), cannabis company owners are generally reluctant to hire a lawyer to help them with their work. I’m not sure if this is because it is relatively “simple” compared to international transactions, or because marijuana owners generally distrust lawyers or do not see our value. The last reason is usually why customers who are burned in a business transaction can become good customers: they know what problems their lawyers can help them avoid, and they can put a price tag on that value.
In a transaction, the seller is usually less willing to hire a lawyer than the buyer because the seller is more concerned about getting paid, and the buyer begins to deal with many potential business issues, including many legacy business issues that the buyer may not know about. on.
What’s in the engagement letter?
When hiring a cannabis lawyer, you should expect to see an engagement letter with the language shown in the capital letters below. The job of marijuana is still very vague, so your lawyer’s offer letter may seek to protect their company as much as possible. Most cannabis engagement letters include other disclaimer language to protect the law firm from future malfeasance claims and to ensure that your expectations as a client are reasonable and may be capitalized:
We cannot guarantee your ability to obtain a business license related to the State of Maria in any way.
Owning, using, cultivating, manufacturing, processing, distributing and selling Marijuuana are all federal crimes. We do not have any legal advice to help you violate any law or avoid detecting or prosecuting such violations.
Our advice is only to assist you in complying with state cannabis laws. The illegal status of marijuana under federal law may affect the relationship between lawyers and lawyers, the privileges of lawyers and lawyers, and the confidentiality of information provided.
How many lawyer’s advice should you follow?
As with all transactions, your legal advisor is considering its ethical obligations to advise you to comply with applicable laws and regulations. No ethics lawyer will advise you to violate applicable state laws and regulations (but conflict between federal and state laws is another matter).
Your lawyer must be familiar with the applicable regulatory structure and may provide you with all the guidance on the regulatory environment through regular emails or memos or the lawyer’s own documentation. This especially includes situations where you want to step into the boundaries of laws or regulations, even if your lawyer personally feels that certain laws and regulations are absurd.
What if the seller does not have a lawyer?
Some marijuana company owners are inherently suspicious of legal counsel, so it is not uncommon for the buyer as the buyer to be the only party in the transaction to hire a lawyer. If the seller does not hire legal counsel, then you and your lawyer will need to determine whether your lawyer should deal directly with the seller, or whether all negotiations should be conducted at the buyer and seller level. Usually, this is a strategic decision about the seller’s expectations and satisfaction.
If your lawyer will be the only lawyer, then you should plan to pay the additional legal fees associated with your lawyer’s execution of all transaction work without the participation of the seller’s lawyer. You may need to work with the seller to resolve this additional cost and increase the purchase price accordingly. You also need to determine whether you, the seller, or the attorney will be responsible for filling out the license transfer form and dealing with state regulatory agencies.
You may want your lawyer to explain the terms of the contract to the seller as a whole, but your lawyer may be hesitant and at least clarify that they will not provide legal advice to the seller in doing so.
Hiring the only lawyer in a transaction is not a bad thing. When the seller does not hire a lawyer, the transaction will usually proceed faster, and the initial case will be closed soon after the initial draft is provided to the seller. The lawyer will ensure that the transaction documents include the seller’s statement that the seller has sufficient time and opportunity to hire his own lawyer.
For more information on this topic, check out Hilary Bricken’s recent post titled Marijuana lawyers and law firms: the good, the bad and the ugly. For earlier articles in this series, see:
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