Cannabis Sales Lawyer

 The Alcohol Gaming Commission of Ontario (“AGCO”) regulates retail cannabis stores and their managers in Ontario under the Cannabis Licence Act, 2018 and Cannabis Control Act, 2017. The AGCO is a Crown corporation with a board of directors appointed by the Ontario Government. It employs an individual called a “Registrar” to make administrative decisions regarding applicants or licensees ability to enter or remain in the retail cannabis industry.

Services 

Burokas Law acts as a cannabis licence lawyer by providing retail cannabis store owners, operators, and employees with advice in applying for a licence or authorization, or advocacy against any type of administrative action by the AGCO. Some common examples include:

• appealing Proposals to refuse, refuse to renew, suspend, or revoke a licence or authorization; 
• conducting hearings at the Licence Appeal Tribunal;
• appealing of Licence Appeal Tribunal Decisions to Divisional Court; 
• defending charges under the Cannabis Licence Act or Cannabis Control Act, and;
• advocacy in the application and licensing process.

Applicable Laws

The AGCO administers a two tiered licensing and authorization regime under the Cannabis Licence Act, 2018. Together with the the Cannabis Control Act, 2017, and the Federal Cannabis Act, 2018, these laws constitute the law of legalized Cannabis in Ontario.

To operate a retail cannabis store, an individual, corporation, or partnership must obtain both a retail store licence and a retail store authorization. One can apply for a licence and then an authorization, or both at the same time. Applying for only an authorization without a licence is not permitted. 

Retail Operator Licence

A licence is required to be eligible to open a retail cannabis store. A licence, or an application for a licence, is a pre-condition of applying for the retail store authorization allowing an individual, corporation, or partnership to operate a specific store and sell cannabis to the public.

An applicant for an  must not meet any of the following criteria to remain eligible for a retail operator licence:

• be less than 19 years of age (including directors, officers, and shareholders if a corporation); 
• have had a licence application refused, revoked, or refused to be renewed in the last two years (exception if there is a change in circumstances);
• there are reasonable grounds to believe the applicant will not be financially responsible in the business;
• having regard to the financial history of the applicant, an interested person of the applicant, the officers, directors, or shareholders of the applicant, or their interested persons. 
• there are reasonable grounds to believe the applicant will not carry on business in accordance with the law, honesty, integrity, or in the public interest;
• Having regard to the past or present conduct of the applicant, an interested person of the applicant, the officers, directors, or shareholders of the applicant (corporate applicants), or their interested persons.
• an applicant, an interested person of the applicant, the officers, directors, or shareholders of the applicant (corporate applicants), or their interested persons, have been convicted or charged with any offence under the Cannabis Licence Act, or certain offences under the Cannabis Control Act, or the Cannabis Act (Federal) or its regulations;
• there are reasonable grounds to believe the applicant is carrying on activities, or would be if licensed, that are in contravention of the Cannabis Licence Act, or certain offences under the Cannabis Control Act, or the Cannabis Act (Federal) or their regulation;
• the Registrar is not satisfied the applicant will exercise sufficient control, directly or indirectly, over the applicant’s cannabis retail business;
• the applicant (or agent, employee) provides false information in an application;
• the applicant has, or previously had, connections with a criminal organization;
• the applicant is in default of filing a tax return or has outstanding amounts owning that are past due and have not made payment arrangements, or;
• the applicant is a corporation that is more than 9.9% owned or controlled by a licensed producer of cannabis. 

Retail Store Authorization

An authorization is specific to a store. In addition to a licence, an authorization is required to operate a store. A holder of a licence who plans to operate multiple stores must obtain separate authorizations for each store. To apply for an authorization, one must first have a licence or be applying for one.

Municipal Banns

The Government of Ontario Government has allowed each municipality the choice to opt out of having a retail cannabis store. Applications for authorizations within these municipalities will not be processed. There are many municipalities that have opted out. For a full list list the AGCO website. Notable (more populated) municipalities include:

• Brantford
• Markham
• Pickering
• Oakville
• Newmarket
• Richmond Hill
• Vaughan 
• Whitby 

Additional Retail Store Requirements

An application for a retail store authorization will not be granted if:

• the space where cannabis is proposed to be sold is not enclosed by walls separating it from other activities or would be passed through to access other commercial activity (other than the common area of a shopping mall), or; 
• the proposed store is located within 150 meters of a school.

General Eligibility 

If a person wishes to apply for an authorization in a municipality that has not opted out, they must meet the following criteria:

• their retail operator licence does not have conditions that would prohibit an authorization;
• an applicant, an interested person of the applicant, the officers, directors, or shareholders of the applicant (corporate applicants), or their interested persons, has not been convicted or charged with any offence under the Cannabis Licence Act, or certain offences under the Cannabis Control Act, or the Cannabis Act (Federal) or its regulations;
• the applicant has, or previously had, connections with a criminal organization;
• there are reasonable grounds to believe the applicant is carrying on activities, or would be if licensed, that are in contravention of the Cannabis Licence Act, or certain offences under the Cannabis Control Act, or the Cannabis Act (Federal) or its regulation;
• the applicant employs or intends to employ an individuals who perform managerial and supervisory functions but does not have a cannabis retail manager licence;
• having regards to the needs and wishes of the residents of the relevant municipality, the proposed store is not in the public interest;
• if the only question is public interest and the applicant is otherwise eligible, the AGCO must provide notice to residents who have 15 days to make submissions regarding the public interest, which the AGCO must consider.
• for stores on reserves, the council of the band has not approved the store;
• the premises, equipment and facilities of the store are not, or would not be, in compliance with the additional store requirements (outlined above);
• the Registrar is satisfied that the applicant will not exercise sufficient control over the premises, equipment, and facilities;
• the applicant or their employee/agent provides false information in an application, or;
• the applicant also holds a licence under the Cannabis Act  (Federal) to produce cannabis. 

Cannabis Retail Manager Licence

No individual may supervise or manage a cannabis retail store unless they have either a cannabis retail manager licence or a cannabis operator licence. To be eligible for a manager licence, an individual must be over 19 years of age and must not meet the following criteria:

• having regard to past and present conduct, there are reasonable grounds to believe the applicant will not, in acting was a manger, act with honesty, integrity, or in compliance with law;
• the applicant has been charged or convicted with an offence under the Cannabis Licence Act, or certain offences under the Cannabis Control Act, or Cannabis Act;
• the applicant has, or previously had, connections with a criminal organization;
• there are reasonable grounds to believe the applicant is carrying on activities, or would be if licensed, that are in contravention of the Cannabis Licence Act, or certain offences under the Cannabis Control Act, or the Cannabis Act (Federal) or their regulation, or;
• the applicant or their employee/agent provides false information in an application.

Interested Persons

The Cannabis Licence Act, like many professional regulatory statutes, utilizes the concept of an “interested person” to ensure individuals who have, or may have influence over a licensee are subject to the same scrutiny as individuals or corporations who apply or hold licences. A person is deemed to be an interested person of another if:

• the person has, or may have a beneficial interest of any kind, directly or indirectly, in the applicant’s or licensee’s business;
• the person exercises, or may exercise direct or indirect control over the applicant’s or licensee’s business, or;
• the person has provided, or may have provided direct or indirect financing to the applicant’s or licensee’s business.

If the Registrar of the AGCO considers an individual an interested person of a applicant or licensee, they will consider that individual’s past conduct in deciding whether to refuse, revoke, suspend, or fail to renew a licence or authorization. 

Inquires

The AGCO has the ability to make inquires and conduct investigations into individual and corporate applicants or licensees in regards to their competence, financial history, or character, in order to determine whether they meet, or continue to meet, the requirements for their licence. This includes their interested persons, or their officers, directors, shareholders (corporate licensees) or partners (partnership). The Registrar can require information or material from these individuals to assist in their inquiry or investigation and compel a written statement that has the same effect as testifying in court. 

The applicant or licensee must pay reasonable costs or provide security to the Registrar to pay for the inquiry or investigation.

Proposals- Refuse, Revoke, Suspend, or Refuse to Renew 

If the Registrar believes that an applicant or licensee does not meet one or multiple of the above listed criteria for the relevant type of licence, he or she will issue a proposal. A proposal is an administrative action the Registrar can take to either refuse an application, revoke an application, suspend an licence, or refuse to renew a licence when it’s up for renewal. 

A proposal is a legal document that will outline what administrative action the Registrar is taking and why he or she is taking it. These reasons must be grounded in the above listed criteria for each type of licence. 

Final Decision

The Registrar’s decision not to issue a retail store authorization is final. It does not issue a proposal to refuse and the decision cannot be appealed. The Registrar will only issue proposals to refuse a retail operator licence or manager licence.

Revocation without a Proposal

Under the Cannabis Licence Act, the Registrar has the power to revoke a licence or authorization without issuing proposal if the holder of the licence or authorization is convicted of:

• selling cannabis other than from an authorized retailer; 
• being a landlord and permitting unauthorized sales of cannabis, or;
• knowingly selling to an individual under 19.

Appeals

The Registrar of the AGCO does not have final authority to determine whether a licence should be refused or revoked (unless described above). Individuals and corporations that receive proposals can appeal the Registrar’s decision to the Licence Appeal Tribunal, an independent tribunal that hears evidence and arguments about why a licence should or should nor be granted/suspended. To appeal, an individual or corporation must serve a notice of appeal to the Licence Appeal Tribunal and the Registrar within 15 days of receiving the proposal. Otherwise, the proposal will be carried out and whatever is being proposed on the proposal will come into effect. 

Hearings

Hearings at the Licence Appeal Tribunal are governed by their Rules of Practice and Procedure. Generally, hearings are similar to a trial in court where each party may make opening submissions, call evidence, cross-examine the other party’s evidence, and make closing submissions. A member of the Licence Appeal Tribunal will sit as an independent adjudicator and make findings of fact, weigh evidence, make witness credibility findings, and apply those findings to applicable law. 

Conditions

It is very common for conditions to be attached to the various licences described above. They often arise in situations where the Registrar has some concerns with an applicant or licensee, but they do not rise to the level of initiating or continuing with a proposal. Such conditions may impose restrictions on conduct or simply reiterate obligations already mandated by the Cannabis Licence Act, Cannabis Control Act, and it’s regulations. Conditions can be either imposed by the Licence Appeal Tribunal as outcome of a hearing, ordered as part of a resolution, or consented to by the applicant/licensee.  

Investigations

The AGCO employs inspectors who are empowered by the Cannabis Licence Act to enter retail stores (without warning) and conduct an inspection to ensure compliance with the Cannabis Licence Act, and it’s regulation. During an inspection, a inspector may open packages, demand and seize records, take photographs and videos, and inquire into financial transactions. The licensee has an obligation to produce documents as requested and assist the inspector as needed. 

Offences and Prosecution

The AGCO also has powers to charge individuals and corporations with offences and prosecute them on court. The offences include:

• selling cannabis that was not purchased from the Ontario Cannabis Retail Corporation; 
• all stores must acquire their cannabis from the Ontario Cannabis Retail Corporation.
• selling cannabis other than in-person;
• selling more than 30 grams of cannabis to an individual at one time, irregardless of the number of transactions involved;
• failing to record sales;
• employing someone under 19 years of age;
• failing to comply with the AGCO’s requirements for unsold cannabis upon ceasing of business;
• acting as an unlicensed retail manager;
• failing to facilitate an inspection;
• offering inducements to a holder of a licence or authorization; 
• obstructing an inspector from completing an inspection;
• threaten, retaliate against, or discourage a whistleblower because they disclosed information, or;
• being a director or officer of a corporation and causing, authorizing, permitting, or participating in an activity that make the corporation guilty of an offence.

Individuals found guilty of one of these offences can be sentenced to a fine up to $100,000 ($250,000 for corporations) and one year in prison. Charges are tried in the Ontario Court of Justice where a trial will be held similar to a criminal trial. 

Any conviction under the Cannabis Licence Act will have severe consequences on an applicant’s or licensee’s ability to enter or remain in the industry. 

Operational Requirements

Retail stores already operating are required to follow many regulations. Notable ones include:

• sales to people over 19 years of age only;
• ensure no individual who appears under 25 years old is permitted inside the store unless their age is confirmed by identification; 
• authorization must be displayed in an location visible to the public;
• cannot sell between 11:00 pm and 9:00 am;
• only purchase cannabis for sale from the Ontario Cannabis Retail Corporation;
• all aspects of a sale- ordering and payment- are done in person;
• cannot sell more than 30 grams to a customer in a single visit;
• must record all sales;
• cannot employ individuals under 19 years of age, or;
• cannot sell to individuals who appear intoxicated.