The Illinois Cannabis Regulation and Tax Act created a new legal industry in Illinois. With the lotteries for craft grow, dispensary, infuser, and transport, the state has created companies that have become worth significant sums of money essentially overnight. In any sort of business where multiple individuals are owners, regardless of whether the structure is a corporation, LLC, partnership, or otherwise, there is the potential for disputes between and among owners. Cannabis companies, due to legal, regulatory, and financing considerations, among others, typically have multiple owners, with some providing capital and others providing effort and expertise. These conditions often lead to disputes about ownership and control of companies, particularly following issuance of a license. Before a license is issued, the goal of such companies is simple- the owners all want to get a license. After the license issues, the disputes become more complex, as individuals diverge in their interests and plans for operating the company. Many partners feel they have been cheated out of their ownership share or management rights, especially as many of these companies have one owner that owns 51%.
The operating agreements or bylaws frequently contain provisions that may assist owners in determining their ownership and control rights. In addition, the Illinois Business Corporation Act of 1983 and the Limited Liability Company Act both provide rights for shareholders and members who are being forced out or denied access to records and information. These laws, along with corporate and LLC governing documents, can help provide a framework for resolution or disputes and set out the parties’ respective rights, which is the first step towards resolving disputes. Given the nascent status of the industry and the potential harm to companies that do not operate, early intervention in these marijuana company ownership disputes is critical before the business loses significant value.