Mailing Date: April 24, 2012
Michael P. Baker, Esquire
c/o Tracy Gilmore
Woods, Baker & Ross
67 Fraley Street
P.O. Box 360
Kane, PA 16735
RE: Transferring Licenses
Dear Mr. Baker:
ISSUE: This correspondence is in response to your e-mail inquiry of March 5, 2012. You state that you represent a client that is a sole proprietor who owns a beer distributor license, together with all equipment used in the operation of the distributor and the real estate on which it is located. Your client wishes to purchase a business from his brother which includes a restaurant liquor license. You ask whether it would be permissible to transfer the beer distributor business to his wife, and whether the transfer of the beer distributor business must be completed prior to applying to purchase the restaurant liquor license from his brother.
OPINION: Please be advised that there is nothing in the Liquor Code or the Board’s Regulations that would prohibit a sole proprietor from transferring his or her beer distributor license to his/her spouse. Because this would represent a change in the entity which holds the license, however, the applicant would have to file an application for a person-to-person transfer of the license with the Board’s Bureau of Licensing. The Application for Transfer of License and Permit is available on the Board’s website at www.lcb.state.pa.us.
As you are apparently already aware, section 436(e) of the Liquor Code [47 P.S. § 4-436(e)] prohibits an officer or director of a corporate distributor or importing distributor licensee from having any pecuniary interest, either directly or indirectly, in the profits of any other class of license. Similarly, the Liquor Code prohibits the holder of a retail liquor license from having any interest in the ownership of a distributor or importing distributor. Specifically, section 411(e) of the Liquor Code provides:
(e) Except as herein provided, no hotel, restaurant, retail dispenser or club licensee, and no officer, director or stockholder, agent or employe of any such licensee shall in any wise be interested, directly or indirectly, in the ownership or leasehold of any property or the equipment of any property or any mortgage lien against the same, used by a distributor, importing distributor, or by an importer or sacramental wine licensee, in the conduct of his business; nor shall any hotel, restaurant, retail dispenser or club licensee, or any officer, director, stockholder, agent or employe of any such licensee, either directly or indirectly, lend any moneys, credit, or give anything of value or the equivalent thereof, to any distributor, importing distributor, importer or sacramental wine licensee, for equipping, fitting out, or maintaining and conducting, either in whole or in part, an establishment used in the conduct of his business.
The purpose of this section is to require a separation of the financial and business interests between manufacturers and holders of hotel or restaurant liquor licenses and, as herein provided, of club licenses, issued under this article, and no person shall, by any device whatsoever, directly or indirectly, evade the provisions of the section.
[47 P.S. § 4-411(e) (emphasis added)].
Sections 411 and 443 of the Liquor Code [47 P.S. §§ 4-411, 4-443] are designed to preclude one (1) type of licensed business (i.e., manufacturer, wholesaler, and retailer) from having an interest in the business of another type of licensed business. Such provisions are commonly referred to as the “interlocking business prohibitions” of the Liquor Code. Retail licenses include restaurants, hotels, eating place retail dispenser licenses, and club licenses or catering club licenses.
Thus, if your client wishes to purchase the business that includes the restaurant liquor license from his brother, your client will need to transfer the beer distributor business, including all financial interest in the business, to his wife (or someone else). The husband and wife will need to keep their finances separated, and it would be impermissible for the wife to lend money to the husband or guarantee his loans. The transfer of the beer distributor business does not have to be completed prior to applying for the purchase or transfer of the restaurant liquor license; however, the Bureau of Licensing will hold the transfer application of the restaurant license in abeyance until the transfer of the beer distributor business is completed.
THIS OPINION APPLIES ONLY TO THE FACTUAL SITUATION DESCRIBED HEREIN AND DOES NOT INSULATE THE LICENSEE OR OTHERS FROM CONSEQUENCES OF CONDUCT OCCURRING PRIOR TO ITS ISSUANCE. THE PROPRIETY OF THE PROPOSED CONDUCT HAS BEEN ADDRESSED ONLY UNDER THE LIQUOR CODE AND REGULATIONS. THE LAWS AND POLICIES ON WHICH THIS OPINION IS BASED ARE SUBJECT TO CHANGE BY THE LEGISLATURE OR THE PENNSYLVANIA LIQUOR CONTROL BOARD.
Very truly yours,
FAITH S. DIEHL
cc: Pennsylvania State Police,
Bureau of Liquor Control Enforcement
Jerry W. Waters, Director of Office of Regulatory Affairs
Tisha Albert, Director, Bureau of Licensing
Jeffrey Lawrence, Acting Assistant Director, Bureau of Licensing
LCB Advisory Opinion No. 12-149