Andrea Hill is a corporate lawyer with Toronto-based SkyLaw Professional Corp.
"And so," a narrator might say, "our story begins." Bill C-45 – the Cannabis Act – has profound implications for licensed producers and other cannabis-related businesses across Canada.
While Canada's strict medical cannabis regime – the Access to Cannabis for Medical Purposes Regulations (ACMPR) – will remain in place for now, the legislation envisions the rise of a diverse and intricately regulated recreational cannabis industry forged from the contributions of multiple levels of government. The federal government has indicated it will revisit the medical regime once a recreational framework is established.
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The bill doesn't address everything. Details of distribution and retail sale are left to the provinces, and many questions, such as tax structure and rules for edibles, don't yet have answers. Regulations on various matters are yet to come.
Happily, the Cannabis Act integrates with the ACMPR on some important points. For example, licensed producers under the ACMPR are automatically deemed to hold recreational licences under it. This is a well-deserved boon to existing licensed producers, many of which have already completed multiple stages of licensing to be able to produce and sell medical marijuana and cannabis oils.
In many ways, however, the Cannabis Act cuts brand-new ground. Most striking is the range of activities for which licences and permits may be issued: importation, exportation, production, testing, packaging, labelling, sending, delivery, transportation, sale, possession, or disposal. This could potentially give rise to a diverse array of specialist licensees, and could allow a business to be part of the licensed cannabis industry without actually having to grow the plant. This is a sensible development which should help businesses access the market without needing to raise significant funds for a production facility and related startup costs.
But with great power comes great responsibility. A key characteristic of the bill is the strict liability it imposes on management. If a corporation (including but not limited to a licensed producer) or its employee, agent, or mandatary violates the Cannabis Act, any of the directors, officers, agents, or mandataries who directed, authorized, assented to, acquiesced in or participated in the commission of the violation will be held liable for it. The legislation explicitly states that no due diligence or mistaken belief defences are available. Violations which last multiple days are counted as multiple violations, and monetary penalties of up to $1-million a violation may be imposed. Certain violations can also carry exposure to criminal sanctions.
These are serious obligations and they speak to the high standard of compliance the federal government expects of future licensees. It will be incumbent on anyone planning to enter the industry to comprehensively understand both the rules and the risks they face.
Another way in which the bill expands on the ACMPR is to take an interest, for the first time, in the shareholders of a licensee. An applicant for a licence under the Cannabis Act would be required to provide "information about its shareholders or members and who controls it, directly or indirectly."
This is an interesting development which should offer the regulator some clarity on who holds the reins of corporate licensees. While existing laws provide for strict disclosure and security clearance screening of directors and officers of licensed producers, little attention has been paid to shareholders. Some accommodation for publicly traded licensed producers would be expected.
The bill also pays significant attention to promotion and packaging of cannabis and accessories. Although plain packaging is not mandated, endorsements are prohibited, as is any presentation which might reasonably be appealing to young persons or which evokes "a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring" – a phrase which could attract a broad range of interpretations.
Finally, the legislation provides the regulator with the ability to establish a cannabis tracking system, and sweeping powers to both refuse to issue a licence (where it is in the public interest to do so) and to terminate applications without recourse for the applicants. All together, these powers suggest that the regulator will maintain a high degree of control over the application process, and will be able to take active steps to balance supply and demand in the cannabis market – an important role which is not clearly provided for in the ACMPR.
As draft legislation, Bill C-45 is the first chapter of the new normal for Canada's cannabis industry. We're off to a great start.