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Arkansas medical marijuana bonds are a type of performance bond that is a prerequisite for obtaining a license to open and operate a medical marijuana cultivation facility or medical marijuana dispensary anywhere within the state.
These surety bonds serve as the licensee’s guarantee to do business in compliance with all applicable laws of the state of Arkansas. Bear in mind that few industries are as highly regulated as the medical marijuana industry. This industry is governed by The Medical Marijuana Amendment of 2016 made to the Constitution of the State of Arkansas of 1874 and the rules of the Arkansas Alcoholic Beverage Division and Arkansas Department of Health.
Arkansas medical marijuana bonds indemnify the state against liability for any financial losses resulting from the unlawful or unethical actions of the licensee. They also provide a source of funds for compensating parties who incur such losses.
Any entity applying for a new or renewal license as a medical marijuana cultivation or dispensary business must obtain the appropriate medical marijuana surety bond. The bond must remain in place at all times to prevent license revocation.
There are separate bonds for cultivation facilities and dispensaries. A medical marijuana cultivation facility is defined as a facility that cultivates, prepares, manufactures, processes, packages, sells, and delivers medical marijuana to properly licensed dispensaries. A medical marijuana dispensary buys medical marijuana from a properly licensed cultivation facility and sells it to registered patients.
Arkansas medical marijuana cultivation facility bonds have a $500,000 required bond amount. The required amount for Arkansas medical marijuana dispensary bonds is $100,000.
The surety bond agreement for an Arkansas medical marijuana bond is a legally binding contract between three parties:
The principal’s violation of any of the terms of the surety bond agreement can result in MMC filing a claim against the principal’s Arkansas medical marijuana bond.
Surety bond firms only sell medical marijuana bonds to principals considered creditworthy. That’s because valid claims are paid in advance by the surety, thus creating a debt that the principal must repay to the surety.
Surety bond companies are very careful about approving applicants for medical marijuana bonds. They require extensive documentation of the principal’s personal credit, business financials, and experience in the medical marijuana industry. A principal considered very creditworthy will typically pay a premium that is between 1% and 5% of the required bond amount.
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