1. (1) Generally. A license under the Act and these Rules is a privilege and not a right. A license under these Rules is a representation of the Commission's trust in the licensee's commitment to participate in the provision of medical cannabis for the benefit of the citizens of this state; the license issued is therefore exclusive and unique to each licensee and is not a commodity to be freely traded nor the property of the licensee to be freely sold, purchased, or otherwise transferred for monetary or other gain without the express permission of the Commission, regardless of any scheme, device or artifice that may be employed in an attempt to legitimize the licensee's or transferee's efforts to do so. (See §20-2A-58(a), Code of Ala. 1975, (as amended)).

2. (2) Restrictions on Sale or Transfer. Commission approval shall be required prior to:

   1. (a) a licensee transferring, selling, leasing, assigning, merging, ceding, gifting, delegating, converting, or otherwise turning over its license, or effective control thereof, to another individual, group of individuals, entity, or group of entities; or
   2. (b) any change in ownership other than a de minimis change, as defined in these Rules.
3. (3) Restrictions of Multiple Ownership. An individual or entity with an interest in a licensee shall not have any interest in any other licensee or any other entity with an interest in any other licensee.

4. (4) Commission Evaluation of Change in Ownership. The Commission shall assess proposed changes in ownership of a licensee according to the following criteria:

   1. (a) De Minimis Change. A de minimis change, as defined in these Rules, shall not require the prior approval of the Commission provided that such change does not violate any other provision of law or these Rules.
   2. (b) Other Non-Controlling Change. Any change in ownership, other than a de minimis change, constituting less than fifty percent (50%) of the total ownership of the licensee and not resulting in a change in a controlling interest, as defined in these Rules, may be approved by the Commission upon demonstration that such change does not violate any other provision of law or these Rules.
   3. (c) Controlling Change. Any change in a controlling interest in a licensee may only be approved following a public hearing in which the suitability of the entity acquiring the controlling interest is determined, which shall include a finding that such change does not violate any other provision of law or these Rules.
   4. (d) The Commission reserves the right to deny any proposed change in ownership requiring approval under these Rules.
5. (5) Ownership Change Request Constitutes Application; Application Fee; Publication. Hearing Request; Intervention. Any request for approval of an ownership change constitutes an application for license and shall be accompanied by the payment of an application fee of $2,500. The request shall be published on the Commission's website and distributed to the representatives of record for existing licensees in the license category.
6. (6) Criteria for Approval. As criteria for approval, the licensee shall demonstrate that the new owner(s) meet all necessary qualifications for ownership under Alabama law and these rules, and that such change does not otherwise disqualify the licensee from holding a license. If a change of ownership involves a licensee meeting the "minority group" requirements of Code of Ala. § 20-2A-51(b), the Commission shall not approve an ownership change that would result in the number of "minority group" licenses falling under the requirements set forth in such statute.
7. (7) Intervention; Hearing Procedures. Interested parties asserting a right to intervene under Code of Ala. § 41-22-14 may file a motion to intervene within twenty (20) days of publication on the Commission's website. Upon timely written request of the petitioner or intervenor of record that the application be assigned to an Administrative Law Judge, the Director shall direct that a public hearing on the application or applications be held before an Administrative Law Judge as provided herein. The assignment to an Administrative Law Judge shall occur within ten (10) days of the request, unless extended by agreement of the parties or as required to identify and resolve scheduling or conflict issues involving a potential judge. The procedures set forth in Ala. Admin. Code r. 538-X-3-.18(e) and (g)-(j) shall apply to any hearing conducted before an Administrative Law Judge pursuant to this rule. The Administrative Law Judge shall file with the Commission proposed findings of fact and conclusions of law in accordance with Ala. Code §§ 41-22-15 and -16. If no timely request is filed for a hearing before an Administrative Law Judge, the matter will be considered directly by the Commission at a date to be set by the Director.

8. (8) Attribution of Ownership Interests. For purposes of this rule, an ownership interest in a licensee will be attributed where:

   1. (a) Interests are held indirectly by an entity through one or more intervening organizations and the successive multiplication of the ownership percentages for each link in the vertical ownership chain result in an ownership percentage that exceeds fifty percent (50%), except that wherever the ownership percentage for any link in the chain exceeds 50%, it shall not be included for purposes of this multiplication. [For example, if A owns 10% of company X, which owns 60% of company Y, which owns 25% of "Licensee," then X's interest in "Licensee" would be 25% (the same as Y's interest because X's interest exceeds 50%), and A's interest in "Licensee" would be 2.5% (0.1 x 0.25)]; or
   2. (b) Interests in voting stock are held in trust by any person who holds or shares the power to vote such stock, to any person who has the sole power to sell such stock, and to any person who has the right to revoke the trust at will or to replace the trustee at will.

9. (9) Constructive Ownership. An entity will be considered to have constructive ownership of a Licensee in each of the following situations:

   1. (a) An individual is considered to be an owner of a Licensee that is owned, directly or indirectly, by or for his or her spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separation maintenance), and by or for his or her children, grandchildren, or parents.
   2. (b) An entity is considered to be an owner of a Licensee when it has an option to acquire stock or other interest in the Licensee. As used herein, the term "option" includes an  option to acquire such an option and each of a series of options. All other agreements such as warrants and convertible debentures will generally be treated as if the rights thereunder already have been full exercised.
   3. (c) An ownership interest in a Licensee owned by a trust will be considered as being owned by its beneficiaries.
   4. (d) The beneficiaries of a decedent's estate which holds an ownership interest in a Licensee will be considered as being owners of the Licensee.
10. (10) In the event of a change of ownership, other than a de minimis change, resulting from death, the Commission shall be notified in writing as soon as practicable, but in no event more than thirty (30) days following the ownership change. Should a transfer of ownership interests be contemplated as part of a probate of an estate or administration of a trust, the Commission may defer consideration until such process is complete. All change of ownership requests due to death under this section shall be subject to the procedures set forth in this rule, provided, however, that such requests shall be deemed presumptively approved provided the new owner(s) demonstrate they are qualified to hold a license under law and these rules.
11. (11) Notwithstanding any other provisions in these rules, consent shall not be required for a transfer of interests in a Licensee's facilities in trust, mortgage, or other instrument of hypothecation to secure an indebtedness, provided that Commission approval shall be required for exercise by a secured party of any rights under such instruments that would result in a transfer of a license or change of ownership to a non-qualifying entity or result in other violation of law or these rules.

Author: William H. Webster; Mark D. Wilkerson; Justin C. Aday

Statutory Authority: Code of Ala. 1975, §§20-2A-22, as amended.

History: New Rule: Published August 31, 2022; effective October 15, 2022. Amended: Published April 30, 2026; effective June 14, 2026.