If you’re in house counsel at any company, you’re likely looking to cut down on the day to day, high volume minutia posed by a variety of commercial agreements and transactions that come your way time and again. Doubly so in the cannabis industry given the fact that you have bigger fish to fry with labor and employment issues, day to day operational issues, fundraising and finding more capital, and dealing with the precarious legal environment created by the current federal law conflict (even with possible rescheduling on the horizon). To alleviate some of that in house stress, general counsels should be considering instituting cannabis corporate playbooks (or alternative language libraries) to make the company’s contracting process more turnkey, predictable, and efficient while cutting down on risk.
What is it?
Simply put, a corporate playbook is a comprehensive guide that compiles a company’s positions, strategies, and protocols around its contracting process that promotes efficiency while mitigating legal and economic pitfalls. It will typically address how the company handles certain kinds of agreements, its “hard stops” on certain asks and negotiation tactics or concessions, alternative language to use if there’s pushback from a third party, and a protocol system for the required buy-in from key decision makers or subject matter specialists.
Why use a Cannabis Corporate Playbook?
The reason to use a playbook is to cut down on outside legal spend while also systemizing a company’s contracts process and protocols. These playbooks are extremely handy for cutting down on day-to-day contracts issues and also help newcomers to the legal department hit the ground running. They also promote streamlined and consistent communication between legal, the c-suite, and the various business teams across the company. Plus, in cannabis, companies should seriously consider these playbooks to help with the local and state regulatory pain points so that they have a sound transactional strategy from state to state as they expand their business initiatives. For instance, intellectual property licensing and/or distribution agreements are incredibly commonplace in cannabis, but both IP licensing and distribution are going to vary from state to state. Instead of re-inventing the wheel in every single state, a well-thought-out playbook would contain an appendix of what can and cannot be done in those agreements in a given state, but also wouldn’t otherwise deviate from the company’s routine positions and asks when it comes to distribution and intellectual property.
Are they “One Size Fits All”? Maybe
Cannabis corporate playbooks can certainly address the simplest agreements (like short form purchase orders) all the way to the incredibly complex, including joint ventures and even mergers and acquisitions. And you can even have different playbooks for different company departments (including HR, procurement, and sales). It just depends on the priorities of a given cannabis company; a multi-state operator certainly isn’t going to have the same needs as a regional powerhouse, but without a doubt both are likely seeing the same sets of certain agreements (depending on state) again and again. And both kinds of companies should certainly have established internal guidelines, codified policies, and routine form agreements when it comes to contract hygiene and maintenance (and, yes, part of a successful playbook is updating it as the company grows and diversifies its lines of business).
What Should Go Into a Cannabis Corporate Playbook?
A solid cannabis corporate playbook should cover:
- production and supply contracts,
- intellectual property licensing,
- white and private labeling,
- manufacturing and quality agreements,
- purchase order forms and terms and conditions,
- long form sales agreements,
- distribution contracts,
- non-disclosure and confidentiality agreements, and
- consulting and services agreements
And all of these agreements should be sensitive to protocol for change based on state-by-state regulation and the risk tolerance of the parties given the volatile nature of cannabis. In turn, a cannabis corporate playbook should also contain an appendix for each state in which the cannabis company operates that addresses any regulatory nuances around control and consideration by contract type.
What Else?
Cannabis corporate playbooks should ultimately prioritize a company’s standard contract provisions (including “must haves”), setting out an explanation of each clause (for negotiation’s sake, if any) along with approved fallback clauses, flags for “hard stops”, and any corresponding intake or internal approval/input protocols (to include regulatory input or other specialists) and an escalation matrix. They should also include checklists with links to form agreements or a contract clause library (depending on the company’s preference). Ideally, you’d also embed links in a playbook to different company policies and procedures related to contract negotiation and approval, including a “deal review” process and/or grading criteria.
The “Ready Set” Plan of Action
Given the current financial struggles of the cannabis industry (coupled with the fact that we may see a big federal legal shift here soon), reducing outside legal spend on your contract portfolio should be an attractive concept. In my experience, cannabis companies have better and more lucrative things to do than to keep kicking the same boilerplate agreements to outside counsel, hemorrhaging on legal spend. And don’t get me wrong, sometimes that move is warranted, but if efficiency, speed, risk mitigation, and survival make up the company’s goals, cannabis company in house counsel should strongly consider implementing a cannabis corporate playbook.
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