Request By:
Mr. J. D. Raine, Sr.
Raine and Raine
1106 Kentucky Home Life Building
Louisville, Kentucky 40202
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Reid C. James, Assistant Attorney General
This is in response to your request for an opinion regarding the propriety of alien shareholding in those businesses licensed to sell alcoholic beverages in Kentucky. You have indicated that several of your clients wish to engage in a retail liquor business, but that one of these individuals is an alien who presently resides in Jefferson County. It is noted that this individual would occupy a shareholder position only and would not serve as a director, principal officer, or manager. On this basis you inquire as to whether or not this individual can properly serve as a shareholder in the proposed business.
The liquor business, as I am sure you are well aware, is subject to strict regulation, and broader administrative control than most other occupations. Alcoholic Beverage Control Board v. Wooskey, Ky., 367 S.W.2d 127 (1963). The Kentucky Alcoholic Beverage Control Board (hereinafter, Board) has been given a wide discretion in regulating this business. Brey v. Alcoholic Beverage Control Board, Ky., 451 S.W.2d 647 (1970). Where this discretion is exercised soundly and reasonably the Board's actions will be sustained. Dolan v. Shopper's Village Liquors No. 2, Inc., 492 S.W.2d 201 (1973).
KRS Chapter 243, relating to alcoholic beverage licenses and taxes, contains several provisions relevant to your inquiry. The first of these, KRS 243.100, as amended by the 1978 General Assembly, provides in pertinent part:
No person shall become a licensee under KRS 243.020 to 243.670 who:
(3) Is not a citizen of the United States and has not had an actual, bona fide residence in this state for at least one (1) year before the date on which his application for a license is made. This subsection shall not apply to applicants for manufacturers' licenses, to applicants that are corporations authorized to do business in this state or to persons licensed on March 7, 1938;
(4) Is a partnership or corporation, unless each member of the partnership or each of the directors, principal officers, or managers of the corporation has not been convicted of any misdemeanor or felony directly attributable to the use of alcoholic beverages, is twenty-one (21) years of age or more and is a citizen of the United States; (Emphasis added).
This statute establishes specific conditions pursuant to which an alcoholic beverage license may not be issued, and its provisions are mandatory. Brown v. Baumer, 301 Ky. 315, 191 S.W.2d 235 (1946);Brown v. Carey, Ky., 442 S.W.2d 566 (1969).
As noted in your letter, however, the word "shareholder" is noticeably absent from this statute. While your observation is correct, KRS 243.100 was intended to address only those limited situations in which the Board has no discretion in granting a license.
A review of KRS 243.390, which specifies the type of information to be contained in license applications, reveals that the Board's decision to grant or deny an alcoholic beverage license may be based upon various factors, where the granting of the license is not automatically precluded by KRS 243.100. That statute states in part:
(1) In addition to such other information as the board may by regulation require, every application for a license under KRS 243.020 to 243.670 shall contain the following information, given under oath:
(a) The name, age, address and residence of each applicant, and, if there is more than one and they are partners, the partnership name and address, and the facts as to their citizenship;
(b) The name and address of each person interested or to become interested in the business for which the license is sought, together with the nature of that interest, and, if the applicant is a corporation, the names, addresses and ages of each officer, director and managerial employe and the facts as to their citizenship, and the state under the laws of which the corporate applicant is incorporated. The department may require the names of all the stockholders;
(c) The premises to be licensed, stating the street and number, if the premises have a street number, and otherwise such a description as will reasonably indicate the location of the premises. The applicant shall also state the nature of his interest in the premises, and the name, age and address of any other person, either as principal or associate, who is interested with the applicant, either in the premises or in the business to be licensed, and the facts as to his citizenship; (Emphasis added).
Based on this statute it is clear that the legislature intended that the information required by KRS 243.390 be the minimum information that an applicant should furnish. It is equally clear that the Board may require other information upon which to base its decision, such as the names and citizenship of a business' stockholders.
KRS 241.060, defining the functions of the board, provides that it may adopt reasonable regulations governing the application for, or revocation of, licenses. Such a regulation is 804 KAR 4:010. In dealing with KRS 243.390(2), * this regulation relates specifically to share transferrals. It provides,
As used in KRS 243.390, the word "change" is construed to include any change of directors or officers of the corporation, or a change in ownership of stock whereby any person secures ten (10) percent of the outstanding stock. Transfer of more than ten (10) percent of the total stock shall require a new license.
Considering in toto the above noted statutes and this regulation it becomes apparent that the Board may, in fact, consider the ownership of a corporation's stock in granting or denying a license application.
It is well recognized that a state legislature may deal with a particular problem as it sees fit so long as there is a rational relationship between the state purpose served and any classifications created in achieving that purpose. Williamson v. Lee Optical Co., 348 U.S. 438 (1955). Kentucky has such an interest in the control and sale of alcoholic beverages.
Since KRS 243.100 is the only statute which specifically proscribes certain persons from receiving an alcoholic beverage license, and because shareholders are not specifically included therein, it is our opinion that the Board may exercise its discretion in determining whether a license should issue under the circumstances presented by your inquiry. There is certainly no absolute proscription of alien shareholders in the liquor business, but it is clear that the Board can solicit information as to their citizenship. KRS 243.390(1)(b) and (c). By enacting KRS 243.100 it was the obvious intent of the legislature that an alien not personally hold an alcoholic beverage license, or direct the activities of a licensed business. Even though alien shareholders are not precluded by that statute it must be recognized as a matter of practicality that stock ownership can reach a point that the shareholder's interest becomes de facto control. In this sense the Board may consider the alien's status in determining whether a license should be granted or denied.
Footnotes
Footnotes
* KRS 243.390(2) states:
(2) If, after a license has been issued, there is a change in any of the facts required to be set forth in the application, a verified supplemental statement in writing giving notice of the change shall be filed with the board within ten days after the change. (Emphasis added).