Regulatory, Licensing

Selling cannabis? Know the rules

By Patricia MacInnis, Senior Editor

Individuals or companies wanting to sell recreational cannabis in Ontario must be licensed and authorized by the Alcohol and Gaming Commission of Ontario (AGCO) and have a supply purchase contract with the Ontario Cannabis Store (OCS), Toronto licensing and compliance lawyer Anar Dewshi writes in The Lawyer’s Daily.

The application process for unlimited retail licences was initially set to start in December 2018, but a shortage of cannabis stock from federally licensed producers prompted the province to introduce a staged approach and allow only 25 licences, says Dewshi, principal of Dewshi Law Practice.

A lottery system to award the initial 25 licences was launched by the AGCO on Jan. 11, she writes.

To open a retail store, Dewshi says owners need three approvals from the AGCO: (1) Retail Operator Licence, (2) Retail Store Authorization, and (3) Cannabis Retail Manager Licence.

“The retail operator licence is valid for a two-year term and will cost $6,000,” she writes. “Licensees will be permitted to operate up to 75 retail stores in Ontario under one retail operator licence.

"The AGCO can place conditions on the licence to address any specific risks or concerns referred to as ‘terms and conditions’ which licence holders must abide by. Once a licence is issued, it cannot be transferred to another person or business.”

Dewshi says operators are required to meet rigorous eligibility requirements: they must demonstrate financial responsibility, compliance with the law and verify sufficient control over the business.

“Applicants must show that they have filed a tax return under federal or provincial legislation where they have been issued a business number, are not in default of filing a tax return or have outstanding amounts owing, past due tax, penalties or interest,” she writes.

Applicants will not be approved if they have a history of cannabis-related criminal offences or operated an illegal cannabis store after Oct. 17, 2018, Dewshi says.

“Moreover, individuals or organizations who have an association with organized crime either as members of a criminal organization or who have been involved with, contributed or contributes to the activities of such an organization will be prohibited from operating a store,” she writes.

Licences will also be denied to companies that are more than 9.9 per cent owned or controlled by one or more approved cannabis producers or their affiliations, Dewshi says.

Retail stores require authorization to operate — the licence costs $4,000 and is valid for two years, she writes, noting storefronts must be stand-alone facilities, cannot be within 150 metres of a school, and operate from 9 a.m. to 11 p.m.

“A condition of a retail store authorization is that the holder not enter into contracts or agreements with any person or entity for the provision of cannabis distribution services. And they require a supply purchase contract with the OCS,” Dewshi says, adding there is a zero-tolerance policy for retailers who sell cannabis to anyone under the age of 19.

“If an individual appears to be under the age of 25, their identification must be checked, which is similar to the purchase of alcohol and cigarettes,” she writes.

All retail stores must have a licensed retail manager except those operating as a sole proprietor or in partnership with two or more people, in which case both will be licensed operators and perform those supervisory duties, Dewshi says.

“The cannabis retail manager is responsible for the cannabis inventory, for hiring and managing employees and for ensuring the store operates with integrity at all times,” she writes.

When it comes to renewing permits, Dewshi says there are two options for the retail operator licence: a two-year term, which costs $2,000, or a four-year term for $4,000. Renewal of retail store authorization costs $3,500 for a two-year term or $7,000 for a four years, she adds.

“A licence or authorization will not be renewed if the licensee does not comply with the legislation or regulations and doesn’t meet the eligibility requirements,” Dewshi writes. “All licensees must ensure that they have complied with the legislation, regulations and guidelines to be granted renewal. If a licence or authorization is denied, then a licensee must wait two years to apply again.”

And if they fail to comply with legislation and regulations, they may have their privileges suspended or revoked, she says.

“They will be advised of the licence or authorization being suspended or revoked and can request a hearing before the Licence Appeal Tribunal,” Dewshi writes.

For more information, she encourages applicants to review the Cannabis Retail Regulation Guide issued by the AGCO.

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