Further to our memo, Regulations for the Licensing and Operation of Private Cannabis Retail Stores in Ontario, the official regulations for retail cannabis stores were made public on November 15. Below are the regulations which will largely impact our clients:

“Affiliates”

  1. (1)  In paragraph 2 of subsection 4 (4) of the Act and this Regulation, an affiliate of a person is,
    1. a corporation that is affiliated with the person for the purposes of the Business Corporations Act, as set out in subsection 1 (4) of that Act;
    2. a corporation that is affiliated with another corporation in the manner referred to in clause(a), if that other corporation is at the same time affiliated with the person in that manner; (b) a corporation of which the person beneficially owns or controls, directly or indirectly, shares or securities currently convertible into shares carrying more than 9.9 per cent of the voting rights under all circumstances or by reason of the occurrence of an event that has occurred and is continuing, or a currently exercisable option or right to purchase such shares or such convertible securities;
    3. a partner in the same partnership as the person;
    4. a trust in which the person has a substantial beneficial interest, whether vested or contingent, or with respect to which the person acts as a trustee;
    5. a member of the same joint venture, unincorporated association, unincorporated syndicate or unincorporated organization as the person; or
    6. a person who is deemed under subsection (2) or (3) to be an affiliate of the person or an affiliate of an affiliate of the person.
  2. (2)  A person is deemed to be an affiliate of another person if the person is a corporation and the other person, or a group of persons or entities acting jointly or in concert with the other person, owns a beneficial interest in shares of the corporation,
    1. carrying at least 50 per cent of the votes for the election of directors of the corporation and the votes carried by the shares are sufficient, if exercised, to elect a director of the corporation; or
    2. having a fair market value, including a premium for control if applicable, of at least 50 per cent of the fair market value of all the issued and outstanding shares of the corporation.
  3. (3)  A person is deemed to be an affiliate of another person if the other person, or a group of persons or entities acting jointly or in concert with the other person, has any direct or indirect influence that, if exercised, would result in control in fact of that person.
  4. (4)  Subsections (2) and (3) apply with respect to a group of persons or entities acting jointly or in concert with another person whether or not they are acting pursuant to an agreement or arrangement.

Retail Operator Licence, Corporation Owned by Licensed Producer

(7) A corporation is not eligible to be issued a retail operator licence if more than 9.9 per cent of the corporation is owned or controlled, directly or indirectly, by one or more licensed producers or their affiliates.

We believe it is the government’s intention to keep licensed producers’ role in the market very limited.

Cannabis Retail Store Requirements

(9) A retail store authorization may not be issued with respect to a proposed cannabis retail store if,

  1. the retail space where cannabis would be sold,
    1. would not be enclosed by walls separating it from any other commercial establishment or activity and from any outdoor area, or
    2. could be entered from or passed through in order to access any other commercial establishment or activity, other than a common area of an enclosed shopping mall; or
  2. the premises at which the cannabis to be sold in the store would be received or stored would be accessible to any other commercial establishment or activity or to the public.

We understand there may be many questions and concerns in the coming days and months. H+K is closely monitoring the situation and will provide updates as soon as possible.