What the Final DHS Rules Require to Be In Dispensary Bylaws

As I have written before, all not-for-profit Arizona medical marijuana dispensaries must have Bylaws and submit the Bylaws to the Arizona Department of Health Services with its application for a dispensary registration certificate.  Both Arizona law (Arizona Revised Statutes Section 36-2806) and the Arizona Department of Health Services rules (R9-17-304(D).8) require the dispensary entity to have Bylaws.  Here is what the DHS rules say must be in the prospective dispensary’s Bylaws:

a. The names and titles of individuals designated as principal officers and board members of the dispensary;

b. Whether the dispensary plans to:

i. Cultivate marijuana;

ii. Acquire marijuana from qualifying patients, designated caregivers, or other dispensaries;

iii. Sell or provide marijuana to other dispensaries;

iv. Transport marijuana;

v. Prepare, sell, or dispense marijuana-infused edible food products;

vi. Prepare, sell, or dispense marijuana-infused non-edible products;

vii. Sell or provide marijuana paraphernalia or other supplies related to the administration of marijuana to qualifying patients and designated caregivers;

viii. Deliver medical marijuana to qualifying patients; or

ix. Provide patient support and related services to qualifying patients;

c. Provisions for the disposition of revenues and receipts to ensure that the dispensary operates on a not-for-profit basis; and

d. Provisions for amending the dispensary’s by-laws

See “Bylaws for Arizona Medical Marijuana Dispensaries,” “Bylaws – We Don’t Need No Stinking Bylaws or Do We?”

By |2012-05-13T16:21:29-07:00April 21st, 2011|Legal Issues|Comments Off on What the Final DHS Rules Require to Be In Dispensary Bylaws

Bylaws for Arizona Medical Marijuana Dispensaries

All Arizona Medical Marijuana Dispensaries Must Have Bylaws

Arizona law requires that all Arizona corporations (for profit and nonprofit) adopt Bylaws.  Since Proposition 203 became law on December 15, 2010, all organizations (not just corporations) that seek a license to own and operate a dispensary in Arizona must adopt Bylaws.  Arizona Revised Statutes Section 36-2806.A states:

The Bylaws of a registered nonprofit medical marijuana dispensary shall contain such provisions relative to the disposition of revenues and receipts to establish and maintain its nonprofit character.”

Bylaws is the name given to the policies and procedures that govern the internal operation of a business organization.  The Merriam-Webster dictionary defines bylaws as “a rule adopted by an organization chiefly for the government of its members and the regulation of its affairs.”

Before Proposition 203 became the law of Arizona Bylaws were used almost exclusively by corporations.  As an Arizona business attorney, I have formed over 3,200 Arizona limited liability companies since I started counting in 2002.  Not one of the LLCs I formed prior to Proposition 203 have Bylaws because the Arizona laws that govern Arizona LLCs do not require Arizona LLCs to adopt Bylaws.  Arizona statutory law requires that all Arizona corporations adopt Bylaws.  Arizona Revised Statutes Section 10-206 (for profit corps) and Section 10-3206.A (nonprofit corps) both contain the following corporate requirement:

“The board of directors of a corporation shall adopt initial bylaws for the corporation.”

If you are part of an organization (regardless of the type of entity) that will seek to obtain a license to own and operate an Arizona medical marijuana dispensary, you must make sure that your organization has Bylaws that contain the specific language required by Arizona medical marijuana law and the Arizona Department of Health Services.  If your organization does not have the required Bylaws, it’s application for a dispensary license will be rejected.

See my article called “Bylaws – We Don’t Need No Stinking Bylaws or Do We?”

By |2017-02-12T07:10:46-07:00January 17th, 2011|Legal Issues|Comments Off on Bylaws for Arizona Medical Marijuana Dispensaries

Bylaws – We Don’t Need No Stinking Bylaws or Do We?

Question:  What are Bylaws & Must My Dispensary Adopt Bylaws?

Answer:  Black’s law dictionary defines Bylaws as “a rule or administrative provision adopted by an organization for its internal governance and its external dealings.”  Bylaws have traditionally been a set of rules adopted by the Board of Directors of a corporation to govern the internal affairs of the corporation.   In fact, Arizona Revised Statutes Section 10-3206 requires all Arizona nonprofit corporations to have Bylaws.

Arizona enacted its limited liability company laws in 1992, but nothing in the Arizona LLC Act refers to Bylaws or requires Arizona LLCs to adopt Bylaws.  As a result, Arizona LLCs that have Bylaws are exceptions to the general rule that Arizona LLCs do not have Bylaws.  The Operating Agreement is the Arizona LLC’s governing document that replaces corporate Bylaws.  Because the most commonly formed entity in Arizona today is the LLC, and because many people who seek to obtain a license to own and operate an Arizona medical marijuana dispensary may form an Arizona LLC for that purpose, the question is does an LLC that seeks a license to own and dispensary need to adopt Bylaws?

The answer to that questions is Yes!  Arizona Revised Statutes Section 36-2806.A states: “The Bylaws of a registered nonprofit medical marijuana dispensary shall contain such provisions relative to the disposition of revenues and receipts to establish and maintain its nonprofit character.”  The rules of the Arizona Department of Health Services also require Bylaws and that the Bylaws contain certain provisions. Therefor, the law requires the dispensary to have Bylaws so you must make sure your nonprofit entity adopts ADHS acceptable Bylaws.

By |2012-05-13T16:26:38-07:00December 27th, 2010|Legal Issues, Questions People Ask|Comments Off on Bylaws – We Don’t Need No Stinking Bylaws or Do We?