Pubdate: Fri, 10 Jul 2015
Source: Daily Press, The (CN ON)
Copyright: 2015 Sun Media
Author: Julius Melnitzer
Page: B8


Revenue Will Double Almost Immediately If Recreational Marijuana Becomes Legal

The legalized pot industry is quickly moving into the mainstream of 
Canada's business and legal communities.

Driving growth is the new Marijuana for Medical Purposes Regulation 
(MMPR), which last year replaced the former home growing regime with 
a system that allows for the commercial production and distribution 
of marijuana by private companies licensed by Health Canada.

As of June 2015, the federal government had issued licences to 25 
producers. Meanwhile, almost 100 medical marijuana "dispensaries" 
have opened in Vancouver.

Many observers had predicted legalized marijuana would become a $ 1- 
billion industry. That number could be conservative. A June decision 
by the Supreme Court of Canada struck down a law that had said 
medical marijuana could only be consumed in dried, smokable forms. 
This opens the door for medical marijuana consumption in teas, 
cookies and oils.

"Legalized marijuana is an industry that has been keeping our lawyers 
busy of late," says Barbara Miller of Fasken Martineau Dumoulin LLP 
in Toronto. She has been advising licence applicants, investors and 
lenders involved in the industry.

"Investors and financial institutions alike are all looking at this 
industry trying to figure out whether there will be more IPOS or the 
extent to which big pharma will try to take over the industry," Miller says.

Medical growers Tweed Marijuana Inc. and Bedrocan Cannabis Corp. have 
agreed to merge in a $58-million all-stock deal that is expected to 
close in August. Tweed became the first publicly traded marijuana 
company in Canada earlier this year when it closed a reverse takeover 
with LW Capital Pool Inc.

Regulators are closely scrutinizing the industry. In February 2015, 
Canada's umbrella group of provincial regulators, Canadian Securities 
Administrators, cautioned investors that 25 cannabis companies had 
provided "unbalanced and promotional disclosure" that raise "serious" 
investor protection concerns.

Clearly, opportunities for lawyers abound. Many of the lawyers 
involved with the industry have practices that embrace health 
sciences. But, like other businesses, pot is spreading its tentacles 
through a variety of legal practice groups. Quite apart from needing 
help with licence applications and advice on operating procedures, 
marijuana growers also need the assistance of tax, financing, 
securities and government relations lawyers.

I f recreational marijuana becomes legal, the revenues from the 
industry will double almost immediately.

"Medical marijuana is a hot area that will be going through quite 
some waves before it calms down," says Cheryl Reicin, a life sciences 
lawyer in Torys LLP'S Toronto and New York offices.

Even municipal lawyers have gotten in on the act. In one case, Fasken 
represented a client who had grown marijuana under the old regime and 
obtained a licence for commercial production under MMPR. The 
municipality where the client was located passed a bylaw prohibiting 
commercial production in the area. Fasken lawyers, however, were able 
to work around the bylaw by establishing that the client's business 
was at least in part a "legal nonconforming" use that predated the 
bylaw and was therefore not subject to its restrictions.

The bylaw challenge is just one of the many issues that can arise in 
corporate pot law.

"Lenders, for example, aren't quite sure about the nature of the 
security they're getting," Miller says. "After all, they can't just 
dispose of pot in insolvency proceedings in the same way that they 
might dispose of other, more traditional assets or inventory."

Insurance companies, sensing opportunities to deal with the risks 
both on the product and the liability side, are also perusing the industry.

"The legal work on the non-applicant side hasn't fully blossomed 
yet," Miller says. "But it will when lenders and others get to 
understand the business a little better - which is what they're 
trying to do now."

And inevitably, there's litigation. e courts are already busy with a 
challenge to the MMPR'S ban on home growing. A decision, which is 
expected in the fall and which could overturn the ban, could have a 
significant impact on the commercial side of the business.

Business opportunities could also arise if pot is decriminalized 
after the federal election in the Fall.

"If recreational marijuana becomes legal, the revenues from the 
industry will double almost immediately," Miller says. "Counsel are 
going to be very busy with this industry."
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MAP posted-by: Jay Bergstrom