What exactly does due diligence look like?
The best answer we found came from attorney Robert McVay, a partner in the Canna Law Group boutique within the Seattle firm Harris Bricken. McVay posted a recent guide to basic due diligence for investors—although the advice works just as well for entrepreneurs and consultants—at Harris Bricken’s CannaLawBlog. McVay’s advice includes these steps:
- Demand to see, and verify, proof of cannabis licenses and compliance. (Records of cannabis licenses in legal adult-use states are all available online.)
- Verify proof of company ownership.
- Read through all existing contracts and licensing agreements.
- Pore over accounting books and records. Know about all debt obligations and verify working capital.
- Demand to know about all current litigation and potential legal claims.
According to McVay, all companies in the cannabis industry should have up-to-date folders with these agreements and documents to make them easily available to potential investors and business partners.