DEF: Verano Holdings Proposes Nevada Reincorporation

Verano Holdings Corp. seeks shareholder approval to reincorporate from British Columbia, Canada, to Nevada, U.S., aiming to streamline operations and enhance U.S. capital market access.

Summary

• A Special Meeting of Shareholders will be held on October 27, 2025, at 9:30 a.m. (Central Time) via live webcast to consider and vote on a Plan of Arrangement.
• The Plan of Arrangement involves the continuance of Verano Holdings Corp. from British Columbia, Canada, to the State of Nevada, United States, resulting in the Company becoming a Nevada corporation.
• Shareholders will vote on a special resolution to approve the Plan of Arrangement, requiring 66 2/3% of the votes cast at the Meeting.
• Upon completion, the Company will adopt new charter documents, including Articles of Domestication, Articles of Incorporation, and Bylaws, and its authorized capital will be amended.
• Existing Class A Subordinate Voting Shares will be automatically exchanged into an identical number of Nevada Common Stock on a 1:1 basis.
• Outstanding Company Options and Restricted Stock Units (RSUs) will be adjusted to Nevada Options and Nevada RSUs, respectively, maintaining the same terms and conditions.
• The Board of Directors unanimously recommends that shareholders vote FOR the Arrangement Resolution.

Sentiment

Score: 7

Explanation: The filing presents a strategic corporate restructuring with numerous anticipated benefits, particularly in enhancing access to U.S. capital markets and streamlining operations for a U.S.-focused cannabis company. While it acknowledges changes in shareholder rights and a Canadian departure tax, the overall tone is positive and forward-looking regarding the strategic advantages of the move to Nevada.

Positives

• The Continuance will better reflect and align with the Company's business and operational focus and strategic objectives, as all operations are U.S.-based.
• It will streamline the Company's organizational and regulatory structure entirely within the United States.
• The Arrangement is intended to enhance shareholder value over the long term by increasing acceptance in U.S. capital markets and improving the marketability of the stock.
• Being incorporated in the U.S. may provide greater comparability of shareholder rights and corporate governance to other public U.S. companies, potentially increasing capital raising opportunities.
• U.S. institutional investors and state-level investment vehicles, some of which are prohibited from investing in non-U.S. companies, may find the Company's shares more accessible.
• A U.S. domicile could assist in listing the stock on a U.S. stock exchange if permitted for U.S.-based cannabis operators, potentially leading to increased trading volume and shareholder value.
• The Company may become eligible for inclusion in certain leading stock indices, which could increase demand for its shares through passive investment.
• U.S. incorporation may help attract and complete business transactions with U.S. domiciled companies, including acquisitions and other strategic transactions.
• Potential reforms in U.S. cannabis banking laws could provide access to additional funding sources and improved financing terms as a U.S. corporation.
• U.S. incorporation may help address and streamline regulatory matters with U.S. governmental entities and improve interactions with U.S. governmental authorities, politicians, and agencies.
• Nevada's strong, developed corporate case law and code-based corporate governance regimes may offer more predictability and certainty in decision-making.
• The favorable corporate environment in Nevada may assist in attracting and retaining skilled, experienced personnel and potential Board members.
• The Continuance is expected to be implemented without any material adverse tax consequences to the Company or its shareholders.

Negatives

• The laws of Nevada may not afford shareholders the same substantive rights and protections as are available under the laws of British Columbia.
• The Arrangement includes certain permitted changes to the Company's governing documents which alter the relative rights of shareholders and management, potentially reducing shareholder participation in certain corporate decisions.
• A special departure tax under Canadian tax laws applies to the Company as a result of the Continuance, although management expects it not to be a material amount.

Risks

• The IRS may challenge the Company's position that it is treated as a U.S. domestic corporation for U.S. federal income tax purposes under Section 7874 of the Code, and no assurance can be given that the IRS or a court will agree with this classification.
• The Continuance may not qualify as an F Reorganization for U.S. federal income tax purposes, which could result in different tax consequences for U.S. Holders.
• If the Company is or has been a U.S. real property holding corporation (USRPHC), gain realized by a Non-U.S. Holder from the Continuance may be subject to U.S. federal income tax unless an exception applies.
• The Effective Date of the Arrangement could be delayed due to objections before the Court in the hearing of the application for the Final Order or at the discretion of the Board.
• The Board may, in its discretion, decide not to proceed with the Arrangement and not to complete the Continuance, even after shareholder approval.
• Shareholders who fail to strictly comply with the Dissent Procedures may lose their right to dissent and receive fair value for their shares.
• If there is a period of time after the Continuance and before the listing of the Nevada Common Stock on Cboe, it is unclear whether the Nevada Common Stock would be a qualified investment under the Tax Act for trusts governed by Registered Plans or deferred profit sharing plans.
• If the Subordinate Voting Shares or Nevada Common Stock are a prohibited investment for a Registered Plan, the holder, subscriber, or annuitant of the Registered Plan may be subject to a penalty tax.
• The Company's ability to designate deemed dividends as eligible dividends for Canadian tax purposes may be limited.

Future Outlook

The Company anticipates that the Continuance to Nevada will enhance long-term shareholder value by increasing acceptance in U.S. capital markets, improving stock marketability, and potentially enabling future U.S. stock exchange listings and inclusion in stock indices. Management expects the special departure tax under Canadian law to be immaterial. The Company is hopeful that the change in governing jurisdiction will improve financing terms if U.S. cannabis banking laws are reformed.

Management Comments

• We believe the Continuance to Nevada will better reflect and align with our business and operational focus and strategic objectives, and will provide other expected and potential benefits.
• The Board and management believe that the potential benefits of the change in domicile and related adoption of the Articles of Domestication, Articles of Incorporation and Bylaws outweigh the disadvantages and make the proposed Arrangement beneficial to the Company and our shareholders.
• Management of the Company currently expects that the special departure tax will not be a material amount.

Industry Context

The Company operates primarily in the U.S. cannabis industry, which is subject to complex U.S. federal and state laws. The proposed reincorporation to Nevada is a strategic move to align the Company's legal domicile with its operational focus, aiming to improve access to the U.S. capital markets. This move is particularly relevant given the current restrictions on U.S. stock exchange listings for U.S.-based cannabis operators and the potential for future reforms in U.S. cannabis banking laws, which could significantly impact funding sources and financing terms within the industry.

Comparison to Industry Standards

• **Quorum of Shareholders**: Nevada (Bylaws) requires at least one-third of voting power, while British Columbia (BC Articles) requires two persons holding at least 5% of issued shares.
• **Required Vote for General Matters**: Nevada (Bylaws) generally requires votes FOR to exceed votes AGAINST, whereas British Columbia (BCBCA) typically requires a simple majority.
• **Extraordinary Corporate Actions**: Nevada (NRS) requires authorization by at least a majority of voting power for mergers or sales of all assets, while British Columbia (BCBCA) requires a special resolution (two-thirds majority) for such actions.
• **Amendments to Bylaws**: Under Nevada law (Articles/Bylaws), the Board of Directors has the exclusive authority to amend the Bylaws, removing this right from stockholders. In British Columbia (BC Articles), certain alterations can be made by ordinary resolution or directors' resolution, but others require a special resolution.
• **Calling of Special Meetings**: Nevada (Articles/Bylaws) restricts the calling of special meetings to the Board, Chair, or CEO, with no right for stockholders to request or call such meetings. British Columbia (BCBCA) allows shareholders holding at least 1/20 of voting shares to requisition a general meeting.
• **Shareholder Consent in Lieu of Meeting**: Nevada (Bylaws) prohibits stockholders from taking action by written consent. British Columbia (BCBCA) permits unanimous written consent resolutions by shareholders.
• **Oppression Remedy**: Nevada law (NRS) does not contain an oppression remedy for shareholders. British Columbia (BCBCA) provides an oppression remedy, allowing courts to make orders if company affairs are conducted oppressively or unfairly prejudicially to shareholders.
• **Business Combinations and Control Share Acquisitions**: The Company has expressly opted out of Nevada's statutory provisions regarding business combinations with interested stockholders and control share acquisitions, which would otherwise impose restrictions or require specific shareholder approvals. British Columbia's BCBCA does not contain exact corresponding provisions, but provincial securities legislation may impose similar requirements.
• **Exclusive Forum Provision**: The new Nevada Bylaws include an exclusive forum provision designating the Eighth Judicial District Court of Clark County, Nevada, as the sole forum for internal corporate disputes, and federal courts for federal securities law claims. The British Columbia Articles do not contain a corresponding provision.

Corporate Governance

Legal Proceedings

• The Company is undergoing a court-supervised Plan of Arrangement process in British Columbia, which includes obtaining an Interim Order and a Final Order from the Supreme Court of British Columbia to approve the corporate reincorporation.
• Existing causes of action, claims, or liabilities to prosecution against the Company will remain unaffected by the Continuance, and legal proceedings may continue by or against the Company.

Related Party Transactions

• George Archos, Chairman and CEO, holds 26,963,356 Subordinate Voting Shares (7.5% of total), including shares held directly and through entities he controls. He also holds security interests in Subordinate Voting Shares as collateral for loans with an aggregate remaining principal balance of approximately $400,000.

Stakeholder Impact

• **Shareholders**: Will exchange their Subordinate Voting Shares for Nevada Common Stock on a 1:1 basis without dilution. They are expected to benefit from enhanced shareholder value, improved marketability, and greater access to U.S. capital markets. However, they will experience changes in corporate governance and shareholder rights under Nevada law, which may differ from British Columbia law, potentially reducing their direct influence on certain corporate decisions. Dissenting shareholders have the right to be paid fair value for their shares.
• **Employees and Management**: The members of the Board and officers of the Company are not expected to change as a result of the Arrangement. The favorable corporate environment in Nevada may help attract and retain skilled personnel and Board members.
• **Customers and Suppliers**: The Continuance is not expected to have a material impact on how the Company conducts its day-to-day operations, implying no direct material impact on customers or suppliers.
• **Creditors**: The Arrangement does not contemplate a compromise of any debt or debt instruments, and no creditor of the Company is expected to be materially negatively affected by the Arrangement.

Next Steps

• Shareholders will vote on the Arrangement Resolution at the Special Meeting on October 27, 2025.
• If the Arrangement Resolution is approved by shareholders, the Company intends to apply to the Supreme Court of British Columbia for a Final Order.
• A Final Order Hearing is scheduled for October 30, 2025.
• If the Final Order is obtained, the Company will file an application for authorization to continue out of British Columbia with the Registrar.
• The Company will file the Articles of Domestication and Articles of Incorporation with the Nevada Secretary of State.
• The expected Effective Date of the Arrangement is on or about October 31, 2025.
• The Board may, in its discretion, delay or decide not to proceed with the Arrangement even after shareholder approval.

Key Dates

Recommendation

The proposed reincorporation to Nevada is a highly strategic move for Verano Holdings, a U.S.-focused cannabis operator. This change in domicile is explicitly designed to enhance shareholder value by improving access to the vast U.S. capital markets, potentially paving the way for future U.S. stock exchange listings and inclusion in key indices. These factors are significant catalysts for growth and liquidity in the cannabis industry, which has faced unique challenges due to its regulatory environment. While there are changes to corporate governance and shareholder rights, the Board's unanimous recommendation and the expectation of immaterial tax consequences suggest a well-considered plan. This repositioning for greater institutional investment and market acceptance presents a strong long-term value proposition, making it an attractive opportunity for investors.

Keywords

Verano Holdings, corporate reincorporation, Nevada domestication, SEC filing, proxy statement, corporate governance, cannabis industry, capital markets, shareholder rights, tax implications, F Reorganization, Dissent Rights, VRNOF, Cboe Canada, OTCQX