Corporate and M&A Insights

On December 17, 2020, the New Jersey legislature passed the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (the “Act”), providing the framework for legal adult recreational cannabis use in New Jersey.  The Act lays out the ground rules for licensing arrangements for the cultivation, packaging, distribution, advertising, and retail sale of recreational cannabis to persons 21 years old or older.  It is important to note that the passage of the Act does not immediately make “street pot” legal—instead, it provides the roadmap for businesses to become licensed so that they may take part in the future legal adult recreational cannabis market in New Jersey.  Cannabis, however, will no longer be a Schedule 1 controlled dangerous drug under New Jersey law (although it remains so at the Federal level).

Although the Act is over 200 pages long, it still requires that the New Jersey Cannabis Regulatory Commission (“CRC”) develop regulations to flesh out the details of how these arrangements will all be put into practice.  For example, there are currently no application forms to apply for any license to operate in the cannabis market in New Jersey.  These forms, their instructions, and a host of other details all need to be developed before any business can apply for one of the required licenses.  The CRC has been given 180 days to develop these enabling regulations and forms.  That said, individuals and businesses interested in entering into this market will want to keep apprised of the details of these ongoing regulatory developments so that they can position themselves to have already put arrangements in place which will allow them to immediately move forward with the application process as soon as it becomes available.

The Act is quite lengthy, and covers a broad range of areas relevant to the development of the legal adult recreational cannabis market and related social justice issues.  The following is not an attempt to fully summarize the Act, but instead simply covers in broad strokes some of the main elements of the arrangements provided for in the Act relevant to businesses that wish to enter into the market.

After receiving numerous complaints about the complexity of the loan forgiveness application form under the Paycheck Protection Program, the SBA and U.S. Department of Treasury on June 16, 2020 approved simplified versions of the forgiveness application.   The original loan forgiveness application was 11 pages long, but now many borrowers under the Paycheck Protection Program (“PPP”) will be eligible to apply for forgiveness under a newly streamlined EZ version of the application which is only 3 pages long.  Borrowers that cannot qualify to use the EZ version will be able to instead now use a 5-page SBA Form 3508.

To qualify for use of the EZ form, a borrower must be able to fit within at least one of the following three categories:

1. The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP application and did not include any employee salaries in the computation of average monthly salaries in the application.

Businesses need to prepare for the short and long term challenges that await as COVID-19 continues to impact the economy.

Lindabury is collaborating with Spector & Ehrenworth, a well respected New Jersey bankruptcy and creditors’ rights law firm, to assist clients with challenges they may face, including customers and vendors unable to meet their financial commitments, as well as cash flow or liquidity concerns.

Below are some issues you may encounter and with which our team can assist. Please contact us with any questions you may have.

Eric Levine, co-chair of Lindabury’s Cybersecurity and Data Privacy practice is quoted in a recent issue of NJBIZ regarding the growing digital threat often disguised as a legitimate-looking email.  Eric says that when our firm receives an email in regards to a bank transaction, “We won’t cut a check against it until it clears our financial institution, and then we’ll wait up to another 10 days.   It can be an inconvenience for a client, but this way we know the money is good.”

To read the full NJBIZ article click here.

Published on:

Robert Anderson was quoted in a recent article published by ROI-NJ regarding the current merger market.

“What’s making deals successful right now is the fact that, when the acquisitions are made, it’s in the context of a very good economy,” he said. “Even if you don’t find that operations are ideal at the company you’ve acquired, the fact that the economy itself is so strong — that tends to pull companies along regardless.”

You may read the full article here.

In ROI-NJ’s recent article, Robert Anderson suggests the potential for the talk of trade wars to permeate other sectors of the economy, potentially adversely impacting other business segments.  Worst case, this could make for a stifling of the free-for-all in business buying and selling that’s going on currently.

To read the full article online click here.

Robert Anderson, chair of Lindabury’s Mergers and Acquisitions group was recently interviewed by ROI-NJ in regards to the recently increase in M&A activity.  Bob has indicated that the the last nine months have been his busiest of the past 30 years.

To read the full article online, click here.

Liquor licenses are state-issued licenses that enable your business to legally sell alcohol. The laws around liquor licenses vary by state and New Jersey has some of the most restrictive liquor license laws in the nation (along with being some of the most expensive). In New Jersey, the Division of Alcoholic Beverage Control (“ABC”) regulates the sale of alcoholic beverages and the conduct of licensees through the issuance of licenses. There are three types of licenses: manufacturing, wholesale and retail.  The subject of this article is a “33 License” or a Plenary Retail Consumption license (i.e. the license you need for a restaurant or similar.)

New Jersey law grants individual municipalities substantial discretion in passing ordinances regulating the sale and consumption of alcoholic beverages within their limits. The number of 33 Licenses available is determined by a municipality’s population, and may be further limited by the town’s governing body. As a result, the availability of alcohol and regulations governing it vary significantly from town to town. Retail licenses tend to be difficult to obtain. The market is in high demands and because of this 33 Licenses are subject to exorbitant prices if and when they become available. License holders (“licensees”) resell their license on the private market — subject to limitation. A license may only be used within the municipality that issued it originally. Moreover, any sale must be approved by the issuing authority. Here is how to get a liquor license broken down into four steps.

  1. Find the license, for sale on the private market. You will have to enter into a Purchase and Sale Agreement contingent upon successful application to the municipal ABC Board. You will also want to check to ensure the license is in good standing, has been properly renewed, etc. In order to do this you will want to run lien searches, request documentation of renewals, etc.

Good news is a brew for New Jersey craft beer advocates. In February 2018, the New Jersey Assembly’s Agriculture and Natural Resources Committee paved the way for the introduction of Bill A2196, which would remove a current licensing rule requiring breweries and distilleries to provide a tour of their facilities before serving alcoholic beverages to consumers. Currently, breweries holding a New Jersey Limited Brewery License are prohibited from selling their brews at the brewery, unless patrons first complete a tour of the premises. This requirement applies to every customer, regardless of whether it is their first or fifteenth visit to a particular brewery, and failure to issue a tour can result in a hefty fine. If passed, Bill A2196 would be the latest step in a number of recent legislative changes aimed at easing New Jersey’s complex and stringent liquor laws.

New Jersey craft beer production has exploded over the past four years. As of February 2018, the New Jersey Craft Beer Association has identified ninety-eight breweries and brew pubs in the State of New Jersey, as well as twenty-four “startup” breweries in the process of obtaining licensing or permits. The growth of craft breweries in the State is in no small part due to a trend in Trenton towards loosening the State’s strict liquor laws by steadily expanding the rights for breweries with Limited Brewery Licensees.

Prior to 2013, breweries were limited to selling their products to licensed retailers and wholesalers. If a brewery was interested in establishing a tasting room, it would be required to obtain a special permit—issued by a different regulatory agency—that limited service to 4 oz. samples. Then, in December 2013, a noticeable shift in policy took hold when the Limited Brewery License was amended to consolidate these laws and permit the consumption of full-sized beers on the premises. The amendment permitted breweries to sell their brews on site for consumption, but only if such beverages were offered in connection with a brewery or distillery tour.

Lindabury partner, Robert Anderson, shares his insight in NJBIZ’s recent article:  “The inside scoop on M&As: Plenty of big companies have learned the hard way how difficult mergers can be”

Sometimes, a planned M&A can get torpedoed because of decisions that were made long ago, notes Robert W. Anderson.  So a potential seller may wish to review its books and records long before putting up a “For Sale” sign.

One suggestion: do some housecleaning, and scour around for any loose ends. That’s because for a buyer, a “big part of an M&A involves due diligence; understanding what they’re buying and how the target company fits in with the acquirer’s business operations and goals,” says Anderson. “If they see a lot of issues, like unsigned contracts, or potential tax and other liabilities, they may back away from the deal.”

Contact Information