IP NEWS

Overview of Licences Available in the Cannabis Supply Chain

06/08/2019

Prior to the instatement of the Cannabis Act on October 17, 2018, access to cannabis was limited to uses for medical purposes. Now, the Cannabis Act and the Cannabis Regulations provide a framework for legal access to cannabis for non-medical purposes, along with the regulation of its production, distribution, and sale. Under this framework, Health Canada has developed a comprehensive regulatory system involving five classes of licences that businesses interested in the cannabis industry can obtain. Each licence authorizes a specific subset of activities that can be pursued, so it is important for a business to map out its goals prior to going through the stringent application process.

Types of Licences

The five classes of licences set out by Health Canada are: cultivation, processing, sale for medical purposes, analytical testing, and research licences. A cultivation licence allows a business to grow cannabis, while a processing licence permits the making of cannabis products. A sale for medical purposes licence allows a business to sell cannabis to registered clients who are authorized to purchase cannabis for medical purposes. Finally, an analytical testing licence allows any testing of cannabis to be done, while a research licence allows research and development to be performed using cannabis. It is important to note that the requirements for obtaining a cannabis licence differ depending on which class is being applied for. Some strategic considerations for your business in selecting and applying for one or more licences are highlighted below.

Scale of Operation Matters for Cultivation and Processing Licenses

As mentioned above, cultivation licences allow a business to grow cannabis, while processing licences allow a business to make cannabis products1. As per the Cannabis Regulations, some examples of cannabis products include dried cannabis or cannabis oil, after it has been packaged and labelled for sale to a consumer at retail level2. Cultivation and processing licences include standard and micro versions of the licences, which affect the scale of cannabis activity that a business would be permitted. A standard licence imposes no limit to the scale of the cannabis-related activity, so it may be obtained for growing cannabis or making cannabis products on a large scale. On the other hand, micro-licences may be obtained for performing these activities on a smaller scale. For example, a micro-cultivation licence imposes a surface area limit of 200 m2 within which all cannabis plants must be contained3. Similarly, a micro-processing licence restricts a business from possessing cannabis products equivalent to more than 600 kg of dried cannabis within a calendar year4. The equivalent weights of various cannabis products to dried cannabis are outlined in the Cannabis Regulations5. As an example, 1 kg of dried cannabis is equivalent to 10 kg of solids containing cannabis, but is only equivalent to 0.25 kg of cannabis solid concentrates. The Cannabis Regulations also state requirements for micro-processing licence holders to maintain documentation demonstrating compliance with the set 600 kg limit.

Site Requirements for a Licence Application

A single licence under the Cannabis Act is limited to a single site. Thus, prior to applying for any licence, it is necessary to ensure that a site where the cannabis-related activities will be held is in place. All licence classes require disclosure of the site’s details, along with the activities that will be performed at the site, within the licence application itself. However, the required site details differ depending on the licence class7. For example, businesses interested in obtaining a licence for cultivation, processing, or sales for medical purposes are required to have a fully built site that meets all the requirements of the Cannabis Regulations at the time of their application8. The site detail requirements for a research licence include details on the type of research that will be conducted (e.g. in vitro, in vivo, clinical trials, etc.). Thus, a single research licence will be limited to the specific research activity applied for, and a separate research licence must be obtained to conduct research activity outside the scope of activities defined in the previous licence.

Obtaining Multiple Licences per Site

Although a single licence is limited to a single site, a single site is not limited to a single activity. Businesses may obtain a combination of licences in relation to a single site, which would allow them to perform all activities related to those licences within it. Such multi-licence approvals are limited, however, to the combinations set out within section 29 of the Cannabis Regulations9. For example, a single site may obtain a licence for research, analytical testing, or sale of cannabis along with any other licence class. On the other hand, a standard licence, whether it be for cultivation or processing, may not be obtained at a site already holding a micro-licence, and vice-versa (in essence, a site must grow cannabis or make cannabis products either on a large scale or on a small scale, but not both).

Conclusion

The process of obtaining a license to perform cannabis-related activities requires careful planning of your business goals. There are many classes of licenses available for a variety of activities, and each class brings with it unique challenges during the application process due to the varying requirements set out by Health Canada. In addition to the site requirements outlined above, there are site personnel, physical security, and Good Production Practice requirements, among others.

Our lawyers at Ridout & Maybee LLP can help navigate the complex cannabis licensing and regulatory regime, and assist with the legal application process for obtaining a cannabis licence.

This article is for information purposes only and does not constitute legal or professional advice.

Author: Akiv Jhirad (Student-at-Law)


1 Health Canada, Cannabis Licensing Application Guide (Health Canada, 2018) at 11, available at https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/industry-licensees-applicants/licensing-summary/guide.html [Cannabis Licensing Application Guide].
2 Cannabis Regulations, SOR/2018-144, s 2.
3 Cannabis Regulations, SOR/2018-144, ss 13(1).
4 Cannabis Regulations, SOR/2018-144, ss 21(1).
5 Cannabis Regulations, SOR/2018-144, s 21.
6 Cannabis Regulations, SOR/2018-144, s 238.
7 Cannabis Licensing Application Guide at 21.
8 Health Canada, “Statement from Health Canada on changes to cannabis licensing” (May 8, 2019), online: Cision, accessed July 18, 2019 <https://www.newswire.ca/>.
9 Cannabis Regulations, SOR/2018-144, s 29.
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