Interim management services agreements

What is an interim management services agreement?

It is a contract under which the buyer, or a buyer affiliate, provides services to the seller’s licensed business between signing and closing. Typical services are staffing support, purchasing, accounting, compliance, marketing and point-of-sale systems. The seller’s entity remains the licensee, keeps the bank account, and makes the decisions.

Buyers want one because a regulator’s review can take six months or more and a business can drift in that time. Sellers accept one because a buyer already invested in operations is less likely to walk. The risk is the same for both: if the agreement hands over control or profit, the state may treat it as an ownership change made without approval. Approval rules are covered on change of ownership approval explained.

How do states regulate management agreements?

State	Rule	What it means for an interim MSA
New Jersey	N.J.A.C. 17:30-6.9: arms-length, fair-market terms; submitted to the Commission before execution; contractor supervised by the license holder; no security or ownership interest, though a right of first refusal is allowed; term of no more than five years without renegotiation; either side may terminate on notice	File first, then sign. Do not combine the MSA with a pledge or purchase option
New York	9 NYCRR 124.3 and OCM guidance: a provider paid more than the greatest of 10% of gross revenue, 50% of net profit or $250,000 in a calendar year is a true party of interest	Keep the fee under the thresholds or be vetted as an interest holder
Washington	WAC 314-55-035: any right to revenue, gross profit or net profit makes a true party of interest; flat or hourly pay under a written contract does not	Flat fee only until the Board approves the buyer
Missouri	19 CSR 100-1.100: brand, management and consultant contracts must be included with a 50%-plus ownership-change application	The MSA is read as part of the deal
California	4 CCR 15023 and the owner definition: anyone who manages, directs or controls the business is an owner and must be disclosed	A manager with real authority is an owner, whatever the contract calls it

The definitions behind this table are explained on true party of interest and financial interest rules.

What has enforcement looked like?

Massachusetts is the best-documented example. State law limits how many licenses one person or entity may control, and the Cannabis Control Commission looked at whether management contracts and loans gave larger companies control of nominally independent license holders.

• In July 2020 the Commission fined Acreage Holdings $250,000 over management services arrangements that the Globe reported were an attempt to exceed the license cap. Acreage terminated the agreements.
• In June 2021 TILT Holdings paid $275,000. The settlement acknowledged the Commission could find TILT should have known it had direct or indirect control of five medical licenses against a cap of three.

The Commission may assess up to $50,000 per violation, and suspension or revocation is available for serious cases. Both matters involved long-term arrangements, not interim ones, but the test is identical. Regulators look at who decides and who profits, not at the title of the document.

A disclosed example

Ascend Wellness Holdings’ fiscal 2025 annual report describes two Midwest dispensary purchases signed in 2025. In each, the parties signed the purchase agreement and a management services agreement together. The MSA paid a set fee, took effect only after the regulator approved it, and stays in place until the ownership change itself is approved and closes. Half of the cash price, $833,000 in one deal and $1,667,000 in the other, was paid when the MSA was approved, with the balance due at final closing. That is the compliant pattern: fixed fee, regulator sign-off first, and an end date tied to closing.

Permitted and prohibited terms

Usually acceptable	Usually a problem
Flat monthly fee or cost plus a fixed margin, at fair market value	Fee equal to all or most of net profit
Manager recommends; licensee’s owners decide	Manager may overrule owners on budgets, hiring of key staff, or pricing
Licensee keeps bank accounts and signs checks	Manager sweeps cash or controls the account
Manager’s staff hold their own badges and work under licensee procedures	Unbadged buyer personnel on the floor
Either party may terminate on notice; automatic end if the sale fails	Irrevocable term or penalties that make termination impractical
Licensee owns inventory and track-and-trace records	Manager takes title to product
Disclosed to the regulator	Side letter not filed with the application

Staff credentials are their own subject; see employee transfer and agent badges.

How should the fee work?

Set a fee that an unrelated service company would charge, document how it was calculated, and keep it clear of the state’s profit-share tests.

Illustrative. A New York dispensary has $4,000,000 of annual gross revenue and $500,000 of net profit. The three tests are 10% of revenue ($400,000), 50% of net profit ($250,000), and $250,000. The threshold is the greatest of the three, $400,000. A flat interim fee of $20,000 a month annualizes to $240,000, which is below it. A fee of 12% of revenue would be $480,000, which is above it and would make the manager a true party of interest before the state has approved it as an owner.

The buyer’s real reward for improving the business during the wait should come through the purchase agreement instead: a working-capital adjustment at closing, or a price that was fixed at signing so that improvements accrue to the buyer once it owns the company.

Checklist for an interim MSA

1. Confirm whether the state requires filing or pre-approval, and do that before any services begin.
2. Define services narrowly. List what the manager does not do: sign for the licensee, hire or fire principals, move cash.
3. State that the licensee’s owners retain final authority and supervise the manager.
4. Use a flat or cost-plus fee and keep the supporting calculation.
5. Require compliance with the licensee’s standard operating procedures and track-and-trace rules.
6. Give the manager read-only system access unless its people are badged and approved for more.
7. Add a manager indemnity for violations it causes, and insurance naming the licensee.
8. Make the term end at closing, on termination of the purchase agreement, or on regulator objection.
9. Cross-refer to the ordinary-course covenants in the purchase agreement so the two documents do not conflict.
10. Attach the MSA to the change-of-ownership filing where the state asks for related agreements.

When should you skip the MSA?

Often. If the seller’s team is capable and the review is expected to take a few months, information rights and ordinary-course covenants in the purchase agreement achieve most of what a buyer needs with none of the regulatory risk. Those covenants are described on regulatory-approval contingencies. An MSA earns its place when the seller is disengaged, the business is in distress, or key staff will leave without visible new leadership. In a receivership, the receiver’s court order, not an MSA, usually governs who operates; see cannabis receivership sales explained.

After closing, the direction of services reverses and the seller helps the buyer. That is covered on transition period and owner training. This page is general education, not legal advice.