Did every officer of a corporation applying for a Maryland liquor license need to personally own stock in the company?

Plain-English summary

The Secretary of the Montgomery County Board of License Commissioners asked what "pecuniary interest" meant under Article 2B, §56(10) of the Maryland Code, as applied to an alcoholic beverages license issued to a corporation or club. Maryland law required a license applicant to state that the applicant held a pecuniary interest in the licensed business, and separately that no one else held any pecuniary interest in it. Because corporate and club licenses were formally issued to three individual officers "for the use of" the corporation or club, the question was whether those three officers each had to personally hold stock or some other ownership stake. The opinion rejected that reading, concluding that requiring individual officers to hold 100% (or even some minimum share) of ownership would lead to absurd results, since many corporations have only one or two shareholders, nonstock corporations and unincorporated clubs have no one who "owns" them at all, and large publicly traded companies could never qualify. Instead, the opinion concluded that the corporation or club itself, not its officer-applicants, must be the entity holding the sole pecuniary interest in the licensed business, and that individual officers need not personally have any ownership stake in the corporation or club they represent.

Currency note

This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did the three officers who apply for a corporate liquor license in Maryland have to personally own stock in the company?
No, according to this 1983 opinion. The Attorney General concluded that Article 2B, §56(10) and (15) required the corporation or club itself to hold the sole pecuniary interest in the licensed business, not the individual officer-applicants.

Why did the Attorney General reject a reading that would require officers to be stockholders?
The opinion found that reading would produce absurd results: it would be impossible for corporations with only one or two shareholders, impossible for nonstock corporations and unincorporated membership clubs (where no one "owns" a pecuniary interest at all), and would bar large publicly traded companies from ever qualifying for a license.

Did Maryland law ever require officers to hold a specific ownership stake?
Yes, but only in specific counties where the General Assembly said so expressly and specified an exact percentage, ranging from 10% in Howard and Worcester Counties to 75% in Wicomico County. The opinion noted Montgomery County, the county that asked this question, was not among them.

Background and statutory framework

Article 2B, §40 allowed a corporation or unincorporated club to hold an alcoholic beverages license by having the license "applied for by and issued to three of the officers of that corporation or club, as individuals, for the use of the corporation or club." Article 2B, §56(10) required the license application to state that "the applicant" had a pecuniary interest in the licensed business, and §56(15) required a statement that no one else was pecuniarily interested in the license or business. Read literally, "the applicant" could be understood to mean the three individual officers who formally submit the application. The opinion worked through two literal readings, requiring the officers collectively to own 100% of the business, or requiring them to hold some undefined minimum interest, and found both unworkable: the first is impossible for closely held, nonstock, or large public corporations, and the second has no textual basis and no discernible standard for how much interest would suffice. The opinion then looked to the General Assembly's own practice: in specific counties, the legislature had expressly required officers to hold stated minimum stock percentages, and had separately carved out exceptions to that requirement for publicly traded corporations, showing that outside those specific provisions, the general rule did not require officer stock ownership at all. The opinion concluded that "the applicant" in §56(10) and (15) is best read as the corporation or club itself, consistent with statutory language elsewhere in §56 referring to the entity "for the use of" or "on behalf of" which an application is made.

Citations

Statutes:

• Article 2B, §56(10) of the Maryland Code (application must state the applicant has a pecuniary interest in the licensed business)
• Article 2B, §56(12) of the Maryland Code (application must state the applicant, or person on whose behalf it is filed, has no other interested licensed place of business in the county)
• Article 2B, §56(15) of the Maryland Code (application must state no person except the applicant is pecuniarily interested in the license or business)
• Article 2B, §40 of the Maryland Code (corporate or club license applied for by and issued to three officers, as individuals, for the use of the corporation or club)
• Article 2B, §40(b) of the Maryland Code (referenced for the phrase "for the use of" the corporation or club)
• Article 2B, §40(b-1)(5) of the Maryland Code (exception to stock ownership requirement for publicly traded corporations)
• Article 2B, §40(c) of the Maryland Code (Howard County stock ownership requirement)
• Article 2B, §40(c)(2) of the Maryland Code (further exception to stock ownership requirement)
• Article 2B, §40(e) of the Maryland Code (Queen Anne's County stock ownership requirement)
• Article 2B, §2(j) of the Maryland Code (defines "licensee" to include a corporation on whose behalf individuals obtained a license)

Cases:

• Cohen v. Orlove, 190 Md. 237, 243 (1948), "pecuniary interest" refers to an ownership interest, not employment or a creditor's interest
• Schweitzer v. Brewer, 280 Md. 430, 438-39 (1977), results that are unreasonable, illogical, or inconsistent with common sense should be avoided in statutory construction

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1983/Volume68_1983.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ALCOHOLIC BEVERAGES

Licenses-Corporations And Clubs-"Pecuniary Interest"-Sole Pecuniary Interest In Licensed Business To Be Held By Corporation Or Club-Individual Officers Need Not Have Pecuniary Interest In Corporation Or Club.

January 27, 1983

Ms. Sharon E. Martin
Secretary
Board of License Commissioners for Montgomery County

On behalf of the Montgomery County Board of License Commissioners, you requested our opinion on the proper meaning and application of the term "pecuniary interest", as used in Article 2B, §56(10) of the Maryland Code, with respect to an alcoholic beverages license issued under Article 2B, §40, "for the use of [a] corporation or club".

For the reasons given below, we have concluded that "pecuniary interest" means ownership interest and, as used in a corporate or club context, applies to the interest of the corporation or club in the licensed business. In our view, the individual officers applying for a license "for the use of" a corporation or club need not themselves own any stock or have any other pecuniary interest in that corporation or club. Rather, the provisions of Article 2B, §56(10) and (15), when read together, require that the corporation or club "for the use of [which]" the application is made must itself have the sole "pecuniary interest" in the business to be operated under that license.

I

The Statute

Article 2B, §56(10) requires every application for an alcoholic beverages license to contain:

"A statement that the applicant has a pecuniary interest in the business to be conducted under said license[.]"

Article 2B, §56(15), in turn, requires every application to contain also:

"A statement that no person except the applicant is in any way pecuniarily interested in said license or in the business to be conducted thereunder during the continuance of the license applied for[.]"1

Read together, the provisions of §56(10) and (15) effectively indicate that "the applicant" must hold 100% of all "pecuniary interest[s]" in the licensed business. And, in this regard, it appears settled that "pecuniary interest" refers to some kind of ownership interest, not employment nor even a creditor's interest. See Cohen v. Orlove, 190 Md. 237, 243 (1948).

The issue here, then, is how these provisions apply to licenses issued to corporations. Article 2B, §40 provides that an application for a corporation, or for an unincorporated club, "shall be applied for by and be issued to three of the officers of that corporation or club, as individuals, for the use of the corporation or club". Thus, in the context of §§40 and 56, it is generally understood that the term "applicant" refers to these officers.

As outlined below, there are several potential ways to construe and apply §56(10) and (15) in the corporate context.

II

Alternative Readings

A. Officer/Applicants to Own Total Interest

The first, and most literal, construction would be to read §56(10) and (15) as requiring each of the individual officers to be stockholders in the corporation, with their combined interests totaling 100% of the outstanding stock of that corporation. That is, §56(10) and (15) would require the applicants to affirm that the applicants, and only the applicants, have a pecuniary interest in the licensed business. In the corporate context, then, the three designated officer/applicants must necessarily own among them the total ownership interest.

This construction, however, leads to several anomalies and, indeed, impossible and absurd results:

For example, such a requirement would be impossible to comply with where a corporation (other than a close corporation, for which a special rule is provided) is owned by but one or two individual stockholders.2

Such a requirement also would be impossible to comply with in cases of applications for nonstock corporations or unincorporated, membership clubs. Normally, no one, in any real sense at least, owns or has a "pecuniary interest" in such corporations or clubs.

Moreover, such a requirement would effectively prevent any corporation with a large number of stockholders, e.g., one whose stock is publicly traded, from ever being eligible to have a license issued for its use virtually anywhere in this State. Obviously, this runs counter to existing practice: in fact, we find that several publicly-traded corporations have had licenses issued "for [their] use" in this State, even though their officer/applicants did not own 100% of the corporation's stock.3

Finally, as discussed more fully below, we find several special provisions in §40 that, as to specific counties (not including Montgomery County), expressly address when, and the extent to which, an officer/applicant must be a stockholder. These special provisions strongly suggest that the general rule does not otherwise require the officers to be the sole, 100% owners of the corporation. Significantly, the provisions are not part of or exceptions to §56. Rather, they are part of §40, which generally requires only that the applicants be officers, or, indeed, in some cases, mere "employees". And they are worded as additional requirements for purposes of §40, not as exceptions to §56 or its requirements.

For these and similar reasons, we do not believe that Article 2B, §56(10) and (15) can be read to require the officer/applicants to be the sole stockholders in the corporation. Thus, if, as seems to be the case, the provisions of §56(10) and (15) require a 100% ownership interest, then the references in §56(10) and (15) to the "applicant" cannot logically refer to the officers applying on behalf of the corporation.

B. Officer/Applicants to Own Some Minimum Interest

An alternative reading of the statute would be to require the officers to own some minimum amount of stock, but not necessarily all. This reading, however, suffers from some of the same problems noted above:

For example, in the corporate context such a requirement totally ignores, and renders meaningless, the express requirements of §56(15): officer/applicants with less than all of the stock could not truthfully affirm, as required by §56(15), that no one else but themselves has a "pecuniary interest" in the corporation.

Moreover, such a requirement would still render it impossible for an unincorporated, membership club to comply with §56(10) because, as a rule, no individual club officer, or any other person, for that matter, has a stock or other "pecuniary interest" in such a club.

Finally, such a requirement simply has no textual basis in the statute itself. And, even if it were read into the statute, we still would find no guidance whatever in the statute as to the amount of interest that the officer/applicants must have: a "controlling" interest, a "substantial" interest, or only some "nominal" interest? Even these oft-used terms have no precise meaning, and the statute is wholly silent as to the standards that should be applied. A "nominal" interest, for example, is often tantamount to no interest at all, either in a monetary ("pecuniary") sense or in a control sense; little, if any, public purpose is served by requiring an officer to have, for example, a 1% (or less) stock interest in a corporation. A "controlling" interest normally speaks to voting rights and powers, not necessarily to monetary (or "pecuniary") interests. And "substantial" interest, for various purposes with respect to even the same corporation, could range anywhere from 33-1/3% (or less) to 66-2/3% (or more). The lack of statutory guidance strongly suggests that such a reading was never contemplated by the General Assembly.

Significantly, where the General Assembly has seen fit to require stock ownership by one or more of the officer/applicants, it not only has expressly said so, as in §40(c) (Howard County) and §40(e) (Queen Anne's County), but it also has specified the exact percentage required, varying from 10% (Howard and Worcester Counties) to 75% (Wicomico County). And where, for example, a specific requirement of stock ownership was thought by the General Assembly to unduly affect the ability of publicly-traded corporations to obtain licenses, express exceptions have been provided. See, e.g., §40(b-1)(5) and §40(c)(2). Except for the special case of close corporations, the General Assembly has nowhere tried to equate an individual applicant's responsibility in terms so nebulous as "nominal", "substantial", or "controlling".

For these and similar reasons, then, we do not believe that the provisions of §56(10) and (15) can be read as requiring the individual officer/applicants to have a stock interest in the corporation.

III

Preferred Reading

Given the problems noted above, we necessarily conclude that the references to the "applicant" in §56(10) and (15) must be read as referring to the entity "for the use of" which [in the words of §40(b)] or "on behalf of" which [in the words of §56(12)] the application is made: the corporation or club itself. The corporation or club must be the one, and the only one, that has the requisite "pecuniary interest" in the licensed business; that is, the corporation or club must be the sole owner of the business, and of the profits earned from the business, operated under the license. Conversely stated, the individual officer/applicants need not themselves have any stock or other pecuniary interest in the corporation, except, of course, in those few counties for which the statute expressly provides otherwise.

The law elsewhere recognizes that the term "applicant", standing alone, makes little sense in the corporate context. For example, §56(12) refers in the alternate to "the applicant, or person on behalf of whom the application is filed".4 To avoid the absurd results outlined above, we believe that §56(10) and (15) must be construed similarly.5

A cardinal rule of statutory construction is that "[r]esults that are unreasonable, illogical or inconsistent with common sense should be avoided". Schweitzer v. Brewer, 280 Md. 430, 438-39 (1977). Our reading of §56(10) and (15), we believe, is the only one that gives some meaning and effect to both §56(10) and §56(15), while, at the same time, avoiding all of the unreasonable, illogical, and inconsistent results that, as outlined above, flow from the various other possible readings of the statute.

IV

Conclusion

In summary, it is our opinion that the individual officers applying for a license "for the use of" a corporation or club need not themselves own any stock or have any other pecuniary interest in that corporation or club. Rather, the provisions of Article 2B, §56(10) and (15), when read together, require that the corporation or club "for the use of [which]" the application is made must itself have the sole "pecuniary interest" in the business to be operated under that license.

Stephen H. Sachs, Attorney General

Avery Aisenstark
Chief Counsel
Opinions and Advice

1 An additional reference to "pecuniary interest" is found in Article 2B, §56(12), which requires:

"A statement that the applicant, or person on behalf of whom the application is filed, is not pecuniarily interested in any other place of business in said county . . . where or for which a license has been applied for, granted or issued under this article, except as otherwise permitted in this article[.]"

2 A modified, though less literal, reading of §56(10) and (15) would be to permit any one or more of the three officers to own 100% of the stock. Although such a reading would answer this particular problem, it would not resolve those that follow.

3 Similarly, a corporation whose stockholders, even if limited in number, do not choose to serve as officers would be precluded from obtaining a license in this State.

4 See note 1 above. See also §2(j), which, for certain purposes, defines "licensee" to mean "a corporation on whose behalf an individual or individuals have obtained a license".

5 We emphasize here, however, that our opinion is limited to the term "applicant" as used in §56(10) and (15). We do not address the meaning of that term as used elsewhere in §56 or other provisions of Article 2B.