Ontario re-lays foundation for brick and mortar sales of recreational cannabis
Tuesday, October 16, 2018 @ 11:01 AM | By Marco Maduri
The proposed system is in line with the Ford government’s campaign commitment to create a private model for the sale of recreational cannabis in Ontario. Bill 36 is a substantial departure from the province’s previous model, which would have seen the Liquor Control Board of Ontario operate a monopoly over recreational cannabis sales in Ontario.
While many details are still forthcoming, a few salient points from Bill 36 are set out below.
Following legalization on Oct. 17, recreational cannabis will only be sold in Ontario through the government’s online platform. Brick-and-mortar sales will begin on April 1, 2019, at privately owned and operated locations.
Duties of the OCRC
The Ontario Cannabis Retail Corporation (the OCRC) will be the only authorized online retailer of recreational cannabis in the province. The OCRC will also be the province’s only wholesaler and distributor of recreational cannabis to private retail sales locations.
The Alcohol and Gaming Commission of Ontario (AGCO) will oversee the licensing of retail sales locations. Similar to applications under the federal Cannabis Act applicants should expect a thorough review of their personnel (including directors, officers and shareholders).
The AGCO’s website states that it will “move quickly to define the licensing process” in an attempt to support the goal of having private stores open for business by next April 1. No further details have been provided and the AGCO is not accepting applications at this time.
Private retailers will be required to obtain multiple authorizations before being permitted to sell recreational cannabis. A “Retail Operator Licence” will grant individuals and corporations the ability to operate retail sales locations.
A retail store authorization must also be obtained for each private retail sales location. Location-specific factors, such as the distance from a school (or other prescribed circumstances), may result in an unsuccessful application.
Restrictions on licensed producers
Producers licensed under the federal Cannabis Act will be subject to additional restrictions under s. 4(4) of the Cannabis Licence Act. Federal licensees must situate retail “on or within the site” set out in their licence. Additionally, federal licensees, “may not between themselves hold more than one retail store authorization” and s. 4(4) states that additional restrictions may be prescribed by forthcoming regulations.
It is unclear if the concept of “affiliates,” as defined for the purposes of the Cannabis Licence Act, will mirror the definition provided in ss. 1(4) of the Business Corporations Act (Ontario) (OBCA).
The OBCA definition of “affiliate” deems one corporation to be another’s affiliate if (i) one of them is the subsidiary of the other, (ii) both are subsidiaries of the same corporation, or (iii) each of them are “controlled” by the same person.
The concept of “control” is also defined in the OBCA and arises where (i) “more than 50 per cent of the votes for the election of directors are held … by or for the benefit” of another person or corporation and (ii) the votes carried are sufficient, if exercised, to elect a majority of a corporation’s board of directors.
Unless another definition is specified in the regulations, this will significantly limit the ability of federal licensees to own and operate multiple retail sales locations through distinct, but affiliated, corporate entities.
Autonomy regarding retail sales on reserves
Bill 36 will grant First Nations broad powers to exercise control over retail sales operations. Councils will effectively have a veto over the construction of retail locations on their territory. Furthermore, the new regime introduces the possibility for the provincial government and First Nations to vary the recreational cannabis regime in accordance with s. 44(1) of the Cannabis Licence Act.
Mirroring the federal Cannabis Act, the Ontario system will seek to keep cannabis away from young people and the proceeds of its sale out of the hands of criminals. Therefore, those operating illegal dispensaries after Oct. 17 will be prohibited from the legitimate licensing process.
Section 41 of the Cannabis Licence Act provides municipalities with the ability to exercise an “opt-out” before Jan. 22, 2019. This will allow a municipality to completely prohibit the creation of recreational cannabis locations within its jurisdiction. In all other cases, public consultation, including a 15-day notice period, will also play a role in where private stores may be located.
By amending the current Smoke-Free Ontario Act, 2017, the province will now generally permit the consumption of recreational cannabis where tobacco and e-cigarettes are currently allowed. In addition, recreational cannabis can also be consumed in hospices, long-term care homes and tourist lodgings such as hotels and motels. Previously, consumption was limited largely to private dwellings. However, consumption will not be uninhibited and there will be restrictions motivated by obvious policy concerns, such as prohibiting consumption within certain distances of schools or in vehicles, such as cars or boats.
Marco Maduri is an associate in the Toronto office of Miller Thomson LLP and a member of the firm’s financial services group. You can reach him at MMaduri@MillerThomson.com. The above is for information purposes only and not meant as legal opinion or advice.
Photo credit / mrhighsky ISTOCKPHOTO.COM
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