As you all know, it is now legal to consume cannabis in Canada. While the federal government was responsible for legalizing cannabis consumption, the provincial governments have been left to address the orderly and safe sale of cannabis to the public. Some provincial governments have rolled out the sale of cannabis through their provincially-owned stores, and some are permitting for private sales by licenced retailers. For instance, you can now buy cannabis at many NSLCs in Nova Scotia (the NSLC is similar to the LCBO), while in Newfoundland there is a private retail structure in place.

Initially, Ontario planned to sell cannabis through provincially-owned stores; however, with the June provincial election came a new government and a new plan to sell cannabis to the public. The Ford government has prepared the Cannabis Licence Act, 2018 (the “Act”) which provides for a private retail system involving licences. The Alcohol and Gaming Commission of Ontario (the “AGCO”) is the government entity responsible for licencing private retail cannabis and has advised that it aims to have licences issued and retail stores open for business by April 1, 2019.

There are actually three licences (or authorizations) that must be obtained prior to a retail store being opened: (1) a Retail Operator Licence; (2) a Retail Store Authorization; and (3) a Cannabis Retail Manager Licence.

• Retail Operator Licence

A Retail Operator Licence must first be obtained by any ‘person’ (the definition of which includes a corporation). An individual applicant must be over the age of 19 and so must any director, officer or shareholder of a corporation. The principle grounds that would render a person ineligible for a Retail Operator Licence is found in subsection 3 (4) of the Act. these grounds are broad and quite vague. For instance, an applicant is ineligible if there are reasonable grounds to believe that they will not be financially responsible in the conduct of the business; or the Registrar is not satisfied that the applicant will exercise sufficient control over the business. There is no further direction in the Act as to what may satisfy the Registrar of ‘sufficient control’ or appropriate ‘financial responsibility”. There are also the obvious ineligibility provisions, such as if there are reasonable grounds to believe that the applicant will not carry on business in accordance with the law or public interest, but again this is quite vague. Will a burglary conviction in 1988 prevent an applicant from receiving a Retail Operator Licence? At this time, we don’t know.

• Retail Store Authorization

A Retail Store Authorization won’t be issued until a Retail Operator Licence is officially awarded, but an applicant can submit its application for a Retail Store Authorization so long as the applicant has also applied for a Retail Operators Licence.

The most interesting carve-out in the legislation regarding Retail Store Authorizations is that they won’t be issued in a municipality that has passed a resolution pursuant to section 41 of the Act prohibiting stores in their municipality. Mayors in Richmond Hill and Markham have already publicly stated that their municipalities will be opting out. In order to officially prohibit cannabis retail stores, municipalities must pass a resolution by January 22, 2019 doing so.

A separate application is required for each proposed retail store, and persons who are currently licenced to produce cannabis (and their affiliates) can only obtain one retail licence that can only be used at their production site – seems similar to a local brewer being able to sell beer at their brewery. The applicant must also satisfy the Registrar that appropriate training, record keeping, and security systems will be in place. And finally, in order to be awarded a Retail Store Authorization, the applicant must employ an individual who is the holder of a Retail Manager Licence.

• Retail Manager Licence

In order to receive a Retail Manager Licence, an individual must: (1) be at least 19 years of age; (2) supervise employees; (3) co-ordinate the sale of cannabis; (4) manage compliance issues; (5) have signing authority to purchase cannabis and to make offers of employment. The eligibility requirements for a Retail Manager Licence are similar to the Retail Operator Licence requirements, which include a discretionary public interest and honesty provision, as well as a provision that provides whether there are reasonable grounds to believe that the applicant would carry on activities that are not in compliance with the Act.

In summary, two licences and one authorization are required to open one privately owned cannabis retail store in Ontario:  (1) a Retail Operator Licence; (2) a Retail Store Authorization; and (3) a Cannabis Retail Manager Licence. Currently, much of the criteria for awarding these licences is broad and quite vague, and seems to provide the Registrar with significant discretion. Municipalities can pass resolutions before January 22, 2019 to prohibit Retail Store Authorizations from being awarded within their boundaries. The AGCO anticipates that it will begin to accept applications for the licences and authorization in December 2018; however the application forms have not yet been publicly released.

1With respect to items (2) through (5) the holder of a Retail Operator Licence may also perform these functions.

— This entry was authored by Scott G. Lemke on November 12, 2018. Since being published there have been significant changes to the legislative landscape surrounding retail marijuana industry in Ontario and the industry continues to adapt to market pressures and supply constraints. Should you have any questions about the retail marijuana industry in Ontario, please contact Lemke Law Professional Corporation.

Information herein is NOT legal, financial or investment advice.