Changing Ownership of a Minnesota Cannabis Business: A Practical, Step-by-Step Guide

This guide is designed to give operators, investors, and business owners a clear, working understanding of what changes are permitted, when prior approval is required, and what steps must be taken to remain compliant under Minnesota law.

---

Minnesota’s adult-use cannabis market allows ownership changes, but only if they are structured correctly and timed carefully. The Minnesota Office of Cannabis Management (OCM) has been explicit: licenses may be transferred, applications may not, and different rules apply depending on whether a business is still an applicant or already holds an active license.

Applicant vs. Licensed Business

Minnesota law draws a bright line between:

• Applicants (pre-licensure), and

• Active license holders (post-licensure)

Before a license is issued, ownership flexibility is extremely limited. After licensure, ownership changes, including changes in majority ownership, may be possible but in most cases require prior written approval from OCM.

Identifying which category a business falls into is the starting point for any ownership analysis.

Ownership Changes Before Licensure (Applicants)

The Core Rule

Minnesota statutes prohibit the transfer of a cannabis application before a license is issued. In practice, this means an applicant cannot sell or transfer majority ownership or control of the applying entity prior to licensure.

That said, OCM does allow certain ownership changes before licensure, provided they fall within strict limits.

Permitted Changes (If All Conditions Are Met)

Qualified and preliminarily approved applicants may make ownership changes before licensure only if the changes do not:

1. Change the individual who holds majority ownership or control of the cannabis business

2. Require a new registration with the Minnesota Secretary of State, including:

   • converting the entity type

   • transferring the application to a different entity

   • changing the business structure

3. Reduce social equity ownership below 65% for social equity–classified applications

4. Add owners who are ineligible based on background check disqualifications

5. Create a prohibited true party of interest structure under Minn. Stat. § 342.185

   
   

Reporting Obligations (No Pre-Approval)

OCM does not provide advance written approval for applicant-stage ownership changes. Instead:

• Changes are made by the applicant

• Once executed, the applicant must report the changes to OCM

• The applicant bears the full risk of non-compliance

  
  

Failure to properly report or comply will result in the application not proceeding.

Practical Takeaway for Applicants

Most problems arise when applicants attempt to:

• bring in capital too early

• restructure entities for tax or investor reasons

• paper side agreements that effectively transfer control

  
  

These issues should be addressed before documents are signed, not after OCM raises concerns.

Ownership Changes After Licensure (Active License Holders)

Once a cannabis license has been issued, Minnesota law provides two distinct paths for changing ownership.

Option 1: Adding or Adjusting Owners (No Change in Majority Control)

Many jurisdictions require regulatory approval for even minor ownership changes. Minnesota is more flexible. License holders may:

• add minority owners

• adjust ownership percentages

so long as the individual holding majority ownership does not change without prior written approval from OCM.

Key Rules

• Changes must be reported to OCM after execution

• All owners must remain eligible to hold a cannabis license

• True party of interest rules continue to apply

  
  

This pathway is commonly used for internal restructurings, minority investments, and incentive equity arrangements. Even so, it must be carefully documented to avoid unintended compliance issues.

Option 2: License Transfer (Change in Majority Ownership)

OCM considers a license transfer to occur whenever there is a change to the individual or group holding majority ownership or control. This includes:

• sales to third parties

• internal restructurings that shift control

• adding a new controlling investor

• transferring a license to a different entity, even if ownership remains the same

  
  

Prior Written Approval Is Mandatory

A license transfer cannot take effect until OCM provides prior written approval. The transferee may not operate under the license until approval is granted.

This regulatory approval step is frequently overlooked. The process is time-consuming and often requires detailed coordination, complete documentation, and active follow-up. Businesses that are prepared and experienced tend to receive approvals more efficiently. Businesses that are unprepared often face extended delays.

Greenbar has obtained regulatory approvals across more than 40 jurisdictions and brings that experience to Minnesota license transfers.

Special Rules for Social Equity Licenses

Social equity licenses are subject to additional restrictions:

• During the first three years of operations, social equity licenses may only be transferred to:

  • another verified social equity individual, or

  • an ownership group that is at least 65% social equity–owned

• All such transfers require review and approval by OCM’s Division of Social Equity

• After three years, transfers to non–social equity buyers may be permitted, subject to approval

  
  

Transactions that ignore these restrictions are routinely delayed or denied.

The OCM Process: What Must Be Submitted

Whether reporting an ownership change or requesting approval for a license transfer, applicants and license holders must email ocm.licensing@state.mn.us and submit the required documentation.

Required Materials Typically Include:

1. Disclosure of Changes to Ownership and Control form

2. Updated capitalization table

3. Updated governing documents, as applicable (e.g., articles, bylaws, operating agreements)

4. Social equity verification for any new owners, if applicable

5. Photo identification for new owners, if not already on file with OCM

6. Background checks for new owners (initiated by the applicant or license holder)

   
   

For license transfers, notification alone is insufficient. Written approval from OCM is required before operations may continue.

Common Deal Mistakes

• Signing purchase agreements before receiving OCM approval

• Assuming internal restructurings are exempt from transfer requirements

• Inadvertently reducing social equity ownership below required thresholds

• Overlooking true party of interest implications

• Treating Minnesota as if it were a more permissive market

  
  

These mistakes often create months of delay or place a license at risk.

How Greenbar Helps

Greenbar advises cannabis and hemp operators on Minnesota-specific ownership changes, license transfers, and regulatory strategy. Our perspective is informed by years spent inside highly regulated cannabis businesses, including serving as general counsel to one of Minnesota’s first licensed operators.

We assist clients with:

• evaluating whether a proposed ownership change is permitted

• structuring transactions to comply with Minnesota law

• preparing and submitting OCM materials

• managing regulatory timing and approval risk

  
  

If you are considering an ownership change, investment, or sale, it is worth addressing these issues before documents are signed.

Contact Greenbar to discuss your transaction and ensure it is executed correctly under Minnesota law.