What You Need to Know About Becoming an Authorized Cannabis Retailer in Ontario

The following are some of the matters you need to consider and understand about licensing, authorization and operating a cannabis retail store in the Province of Ontario.  Your trusted legal advisor can assist you with the applications process, business start-up, legal issues relating to ongoing business activities, as well as regulatory and compliance matters.

A) LEGALIZATION OF RECREATIONAL CANNABIS

On October 17, 2018 recreational cannabis was legalized by the federal government of Canada.  The sale and distribution of recreational cannabis is within the jurisdictions of the provinces/territories of Canada.

In Ontario, the Ontario government passed the Cannabis Control Act, 2017 (the “CCA”) for the purpose of establishing prohibitions relating to the sale, distribution, purchase, possession, cultivation, propagation and harvesting of cannabis in order to:

  • protect public health and safety,
  • protect youth and restrict their access to cannabis, and
  • ensure the sale of cannabis in accordance with the Ontario Cannabis Retail Corporation Act, 2017 and the Cannabis License Act, 2018 (the “CLA”).

The CLA sets out the licensing scheme for private cannabis retail stores and will be administered by the Alcohol and Gaming Commission of Ontario.

Medical cannabis is subject to different laws and regulations than recreational cannabis.  The federal government of Canada exclusively regulates the production and sale of medical cannabis.

B) ONTARIO AUTHORIZED CANNABIS RETAILER

Prohibitions on Sale or Distribution under the CCA

  • Pursuant to the CCA, no person shall sell or distribute cannabis except an “authorized cannabis retailer”. Other than the Ontario Cannabis Retail Corporation, an “authorized cannabis retailer” means “the holder of a retail store authorization under the CLA when acting in accordance with the authorization”.
  • No person shall knowingly sell or distribute cannabis to:
    • a person under 19 years of age.
    • a person who is or appears to be intoxicated.
  • No person other than an authorized cannabis retailer may use the cannabis retail seal prescribed for the purposes under the CLA, or otherwise represent themselves to be an authorized cannabis retailer.
  • Online sales of recreational cannabis are also permitted, but only by the provincial government. Online purchases may only be purchased from the Ontario Cannabis Retail Corporation.

 

C) LICENSING AND AUTHORIZATION UNDER THE CLA

To operate a cannabis retail store in Ontario, a person must apply for and be granted both a retail operator licence and a retail store authorization under the CLA.

1. Retail Operator Licence 

Subject to certain conditions under the CLA, and its regulations, a person may apply to the Registrar for a retail operator licence.  An individual applicant must be at least 19 years of age or, in the case of an applicant that is a corporation, every director, officer and shareholder of the corporation must be at least 19 years of age.

Eligibility

Some of the circumstances in which an applicant would not be eligible to be issued a retail operator licence include:

(a)          there are reasonable grounds to believe that the applicant will not:

(i) be financially responsible in the conduct of the applicant’s cannabis retail business;

(ii) carry on business in accordance with the law, or with integrity, honesty or in the public interest.

(b)          a person has been convicted of or charged with an offence under the CLA, CCA, Cannabis Act (Canada) or their regulations.

(c)          there are reasonable grounds to believe that the applicant is carrying on activities that are, or would be, in contravention of or not in compliance with the CLA, CCA, Cannabis Act (Canada) or their regulations.

2. Retail Store Authorization

Subject to certain conditions under the CLA, and its regulations, the following persons may apply to the Registrar for a retail store authorization to operate a specified proposed cannabis retail store:

  • A holder of a retail operator licence, subject to any conditions attached to the licence.
  • An applicant for a retail operator licence.

Notwithstanding the foregoing, an application may not be made for a retail store authorization in respect of a proposed cannabis retail store that would be located in a municipality or on a reserve on which cannabis retail stores are prohibited from being located.

Restrictions re: Producers

A person who is authorized by a licence issued under the Cannabis Act (Canada) to produce cannabis for commercial purposes is subject to the following restrictions in respect of an application for a retail store authorization:

  • the proposed cannabis retail store must be located on or within the site set out in the licence.
  • the person and its affiliates may not between them hold more than one retail store authorization.
  • any other restriction that may be prescribed.

One Store per Authorization

A separate application is required in respect of each proposed cannabis retail store, and a retail store authorization that is issued only authorizes the operation of the store specified in the application for the authorization.

Eligibility

Some of the circumstances in which an applicant would not be eligible to be issued a retail store authorization include:

  • the applicant is not, or would not at the time of the issuance of the authorization be, the holder of a retail operator licence.
  • the applicant (or other specified persons) has been convicted of or charged with an offence under the CLA, CCA, Cannabis Act (Canada), or their regulations.
  • there are reasonable grounds to believe that the applicant is carrying on activities that are or would be in contravention of or not in compliance with the CLA, CCA, Cannabis Act (Canada) or their regulations.
  • the applicant employs/intends to employ an individual who is not the holder of a cannabis retail manager licence to perform certain functions set out in the CLA.
  • it is not in the public interest.
  • the premises, equipment and facilities of the proposed store are not, or would not be, in compliance with the CLA, its regulations or standards and requirements.

3. Cannabis Retail Manager Licence

Subject to certain eligibility requirements and conditions under the CLA, and its regulations, an individual (at least 19 years of age) who wishes to perform one or more of the following functions in respect of a cannabis retail store may apply to the Registrar for a cannabis retail manager licence:

  • supervising or managing employees of a cannabis retail store.
  • overseeing or co-ordinating the sale of cannabis.
  • managing compliance issues in relation to the sale of cannabis.
  • having signing authority to purchase cannabis, enter into contracts or make offers of employment.

4. No Transfers

Retail operator licences, cannabis retail manager licences, and retail store authorizations are not transferable.

D) CONDITIONS AND REQUIREMENTS OF A HOLDER OF A RETAIL STORE AUTHORIZATION

1. Some Conditions and Restrictions Applicable to a Retail Store Authorization Holder

Ongoing Sale

The holder of a retail store authorization issued under the CLA (“RSA Holder”) must ensure that cannabis begins to be sold at the cannabis retail store by the 1st anniversary of the day the authorization is issued, and that cannabis continues to be sold at the store after that date.

Use of Seal

Cannabis may not be sold unless the RSA Holder displays, in the prescribed manner, the prescribed cannabis retail seal.

Minimum Pricing

If the CLA regulations so provide, the RSA Holder shall not sell cannabis or a prescribed class of cannabis at a price that is lower than the prescribed price for the cannabis or class of cannabis.

Restrictions on Operations

The following are some restrictions and requirements of a RSA Holder under the CLA with regard to selling and operations.  The RSA Holder,

  • shall not sell cannabis unless the cannabis has been produced by a person or entity that is authorized under the Cannabis Act (Canada) to produce cannabis for commercial purposes.
  • shall not sell cannabis to an individual under 19 years of age.
  • shall not sell or distribute cannabis to a person who is or appears to be intoxicated.
  • shall keep appropriate records, in accordance with the regulations and any applicable standards and requirements established under the CLA.
  • shall take adequate measures (in accordance with the regulations and standards/requirements under the CLA) to reduce the risk of cannabis it possesses being diverted to an illicit market or activity.

2. Sale of Cannabis and Cannabis Retail Stores

Things Permitted to be Sold in Cannabis Retail Stores

The RSA Holder may only sell the following things at a cannabis retail store:

  • Subject to the CLA regulations, cannabis that was purchased by the RSA Holder directly from the Ontario Cannabis Retail Corporation, in the packaging in which it was purchased from the Ontario Cannabis Retail Corporation.
  • Any other things that may be prescribed.

Purchase of Cannabis

The RSA Holder may only purchase cannabis for sale in the cannabis retail store from the Ontario Cannabis Retail Corporation.

In-Person Sales Only

The RSA Holder shall ensure that all aspects of the sale of cannabis through the cannabis retail store, including ordering and payment, are conducted in person at the store.

Limit on Amount Sold

The RSA Holder shall ensure that the amount of cannabis sold to an individual in the cannabis retail store in a single visit, whether in a single or multiple transactions, does not exceed 30 grams of dried cannabis or the equivalent amount of another class of cannabis determined in accordance with Schedule 3 to the Cannabis Act (Canada), or such other amount as may be prescribed.

Only Recorded Sales Permitted

The RSA Holder shall ensure that cannabis sold at the cannabis retail store is sold only through recorded sales.

No Employment of Individual Under 19 Years of Age

The RSA Holder shall not employ an individual under 19 years of age in a cannabis retail store.

Standards and Requirements

Subject to the CLA, the Registrar may establish standards and requirements respecting the following matters relating to the conduct of holders of licences or authorizations issued under the CLA or to the operation of cannabis retail stores:

  1. Store premises, equipment and facilities, including surveillance and security.
  2. The prevention of unlawful activities.
  3. Advertising and promotional activities.
  4. Training relating to cannabis.
  5. The protection of assets, including money and money equivalents.
  6. The keeping of records, including financial records.
  7. Reasonable measures to maintain the confidentiality and security of records.
  8. Compliance with a cannabis tracking system established under the Cannabis Act (Canada).
  9. Any other matter relating to the conduct of holders of licences or authorizations issued under the CLA or to the operation of cannabis retail stores that may be prescribed.

CLA Regulations

In addition to the provisions under the CLA, the regulations of the CLA prescribe certain restrictions and requirements with regard to various matters, including operating matters such as, the retail space and premises, hours of operation, training requirements, display of authorization, distribution services, etc.

The foregoing matters are just some of the matters you need to know and understand before you embark upon becoming a licensed/authorized cannabis retailer in Ontario.

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