5 Essential Risk Factors Cannabis Companies Should Disclose When Raising Capital

Hilary Bricken - Attorney at Canna Law Group

Hilary Bricken, an attorney at Harris Moure since 2010 and the leader of its regulated substances practice, and her fellow partners share an incredible amount of helpful information regularly through the Canna Law Blog.  This week, she takes on the very important topic of crafting a private placement memorandum properly by including risk factors for investors.

She calls this “the most important section” of the document, as improper or insufficient disclosures can lead to trouble down the road with state or federal regulators. In Bricken’s view, many companies are not doing a good job with respect to this obligation, and she advises that these five disclosures should be in every PPM:

1) Marijuana is federally illegal

2) Investors risk criminal liability and the cannabis business’s assets are subject to forfeiture

3) Marijuana businesses may still not be able to secure bank accounts

4) IRC 280E

5) State marijuana laws and rules are not uniform from state to state and they can and do change constantly

The cannabis industry has its own set of unique risk factors beyond normal startup company risks that Bricken explains thoroughly in her post. She points out that companies that that properly disclose these inherent issues shift the burden of investment risk from themselves to the investors.

Read Hilary Bricken’s “Marijuana Private Placements: Don’t Skimp on Risk Factors”: http://www.cannalawblog.com/marijuana-private-placements-dont-skimp-on-risk-factors/

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