RELATES TO:
KRS
243.030,
243.040,
243.110,
244.240,
244.570,
244.590
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
241.060 authorizes the board to promulgate
administrative regulations regarding matters over which the board has
jurisdiction. The control of alcoholic beverages in the Commonwealth of
Kentucky, as codified in Chapters 241 - 244 of the Kentucky Revised Statutes,
has been established by the Kentucky legislature as a "three tiered" system.
The three (3) tiers of this system are designated as manufacturer/producer,
wholesaler/distributor, and retailer. Each of these three (3) levels operates
separately, distinctly, and apart from each other for the purpose of control.
In order for this control to be effectively administered by this board, it is
necessary to prevent any type of interlocking substantial interest by and among
the three (3) separate tier levels. This administrative regulation provides
additional detail regarding incompatible licenses and prohibited interlocking
substantial interests among the tiers.
Section
1. Definitions.
(1)
"Manufacturer" means a person or entity who is a distiller, rectifier, winery,
brewer, or who otherwise produces alcoholic beverages, whether located within
or without this state.
(2)
"Retailer" means a person or entity who sells alcoholic beverages at retail,
whether located within or without this state, excepting manufacturers with
limited retail privileges or the right to hold certain retail
licenses.
(3) "Substantial
interest" means:
(a) Membership in, or a
direct or indirect ownership interest in, a business, sole proprietorship,
partnership, corporation, limited liability company, limited liability
partnership, or other legal entity, whether individually, or by a spouse, or in
combination with a spouse, which amounts to ten (10) percent or greater of the
total ownership or membership interests;
(b) A common officer, director, manager, or
employee with managerial responsibilities, in a business, sole proprietorship,
partnership, corporation, limited liability company, limited liability
partnership, or other legal entity;
(c) A common owner, partner, or member,
including a spouse, the aggregate share of which is ten (10) percent or greater
of the total ownership of, or membership in, a business, sole proprietorship,
partnership, corporation, limited liability company, limited liability
partnership, or other legal entity; or
(d) Any other direct or indirect interest
which provides an ability to control or influence decisions by a business, sole
proprietorship, partnership, corporation, limited liability company, limited
liability partnership, or other legal entity.
(4) "Wholesaler" means a person or entity who
is a wholesaler, distributor, or who sells alcoholic beverages at wholesale,
located within this state.
Section
2. A manufacturer shall not have or acquire a substantial interest
in the establishment, maintenance, or operation of the business of a wholesaler
or a retailer. A manufacturer shall not have or acquire, by ownership,
leasehold, mortgage, or otherwise, directly or indirectly, a substantial
interest in the premises of a retailer.
Section
3. A wholesaler shall not have or acquire a substantial interest
in the establishment, maintenance, or operation of the business of a
manufacturer or retailer. A wholesaler shall not have or acquire, by ownership,
leasehold, mortgage, or otherwise, directly or indirectly, a substantial
interest in the premises of a retailer.
Section
4. A retailer shall not have or acquire a substantial interest in
the establishment, maintenance, or operation of the business of a manufacturer
or wholesaler.
Section 5. The malt
beverage administrator and distilled spirits administrator, as appropriate,
shall examine every applicant for a new or renewal license to determine whether
issuance or renewal of the license is prohibited under applicable law or this
administrative regulation. If the issuance or renewal of the license is
prohibited, the appropriate administrator shall not issue or renew the
license.
Section 6. This
administrative regulation shall not apply to:
(1) Prohibit an affiliated business
arrangement which meets the requirements provided in
804 KAR
4:280, Section 2;
(2) A license issued prior to June 24, 2015,
for any prohibited substantial interests resulting from the ownership interests
of a spouse; or
(3) A license
issued prior to December 1, 1976.
