This article was originally published in The Pennsylvania Observer / Pennsylvania Beverage Media in November 2022. A pdf version can be found here.
Q. I am a member in a limited liability company holding a restaurant liquor license and I have the opportunity to become a majority shareholder in a corporation holding a brewery license. I want to be both a member in the brewery and a shareholder in the limited liability company holding the restaurant liquor license. Can this be done?
A. You will not be legally allowed to hold an ownership interest both as a shareholder in a brewery licensed by the Pennsylvania Liquor Control Board (PLCB) and to continue to qualify as a member in the limited liability company holding the retail restaurant liquor license issued by the PLCB. The Liquor Code (47 Sec. 4-443 and Sec. 4-411) prohibits interlocking financial business interests such as you are proposing. Furthermore, the Liquor Code specifically prohibits you from holding a direct interest or even an indirect interest in two classes of licenses issued by the PLCB, namely a brewery license, which is a manufacturing class license, and a restaurant liquor license, which is considered a retail class license.
The stated reason for this prohibition is “to require a separation of the financial and business interests between the various classes of business” regulated by the Liquor Code. The purpose of the law therefore is to prevent a single company from controlling or owning the manufacturing, the distribution, and the retail outlet for an alcoholic product (which is the system in England), or gaining an unfair financial advantage (for example below cost pricing). Thus the law gives smaller businesses a better opportunity to be involved in the alcoholic beverage industry, and to compete fairly.
There are exceptions to the prohibition against interlocking business interests, but your factual situation does not qualify for any of the exceptions. The only way for you to be involved in the restaurant liquor license is to divest yourself of your interests in the licensed brewery.
An example of an exception to the Liquor Code’s prohibitions against interlocking interests is where the holder of a retail license and its officers, directors, and shareholders can be involved as a landlord in the lease of a building to a holder of a manufacturers’ license. For example, a brewery. You should consult with your attorney regarding your legal choices in this matter.
