Has the AGCO amended the Expression of Interest Lottery Rules?

Yes.  An amendment was made to Rule 16a at 4:30 pm EST on Friday, January 4, 2019.  The amended Lottery Rules are available on AGCO’s website.

 

General

1. Is the lottery for 25 stores or 25 Retail Operator Licences?  If it is for 25 Retail Operator Licences, how many stores can I open?

To be able to legally open a retail store to sell recreational cannabis, you must get a Retail Operator Licence.  To get this licence, you must meet all of the eligibility criteria as set out in the Cannabis Licence Act, 2018 and its regulations.

The lottery will determine who may apply for the initial 25 Retail Operator Licences to legally operate a cannabis retail store. Each holder of a Retail Operator Licence will be eligible to apply for one Retail Store Authorization, allowing them to open one cannabis retail store location.

 

2. How does the lottery announced by the Government of Ontario on December 13, 2018 change the AGCO’s already announced cannabis licensing process?

The AGCO’s licensing process will remain the same, and potential operators will be required to apply for both a Retail Operator Licence and a Retail Store Authorization to operate a cannabis retail store.  In addition, licensed Retail Managers will be required in most instances in order to perform certain functions within a cannabis retail store, including having responsibility for the cannabis inventory, for hiring and managing employees, and for ensuring the store operates with honesty and integrity at all times.     

The change announced means that only the 25 Expression of Interest Applicants selected through the lottery may apply for a Retail Operator Licence and a Retail Store Authorization.

 

3. If I’m selected in the lottery am I guaranteed a Retail Operator Licence and Retail Store Authorization?

No.  If an Applicant is selected in the lottery and notified by the Registrar that the Applicant may apply for a Retail Operator Licence and Retail Store Authorization, the AGCO will apply its full due diligence process to determine if the Applicant will carry on business in accordance with the law, and with integrity, honesty, and in the public interest.

 

4. An iAGCO account holder may submit only one Expression of Interest Application.  How will the AGCO know that applicants are not creating more than one iAGCO account and Expression of Interest?  

Throughout the lottery process, AGCO will review the Expression of Interest Applicant information for compliance with the Expression of Interest Lottery Rules.    The AGCO will prior to, during, and after the lottery, remove any confirmed duplicate Expressions of Interest Applications, and determine if applicants or their representatives do not create more than one iAGCO account, which would result in disqualification

See Expression of Interest Lottery Rule 5 for disqualification matters.

This limit of one Expression of Interest entry per Region applies to an applicant and any of its Affiliates, the meaning of which is set out in Ontario Regulation 468/18. To be clear, this means that if “Applicant A” is affiliated with another “Applicant B”, then only one of them may submit an Expression of Interest in a particular Region.

Please note that any Applicant who submits more than one Expression of Interest Application with respect to the same Region, may not apply for a Retail Operator Licence and will be disqualified from the lottery.  This limit of one Expression of Interest entry per Region applies to an Applicant and any of its Affiliates.

 

5. I had intended to open a cannabis retail store under the Government of Ontario’s previous model.  Will my months of hard work offer me any advantage over somebody who just now decided to submit an Expression of Interest Application?

Potential applicants who are not committed to opening a cannabis retail store on April 1, 2019 should not participate in this lottery.  

Expressions of Interest entries will be randomly selected. The Expression of Interest Lottery Rules have been established to encourage the opening of stores on April 1, 2019, And have various provisions to incent Applicants to meet this timeline, including requiring the 25 selected Expression of Interest Applicants to:

  • submit a $50,000 Letter of Credit, which will be drawn on if they are not able to meet the April 1, 2019 timeline. 
  • pay a non-refundable $6,000 Retail Operator Licence application fee. 
  • following completion of the Retail Operator Licence application, pay a non-refundable $4,000 Retail Store Authorization application fee.

 

6. Why is the government continuing to target April 1, 2019 for cannabis retail store openings?  

The Government of Ontario has committed to establishing a tightly regulated private cannabis retail model in order to provide a safe, legal alternative to the current illegal market.  In order to more effectively combat the illegal market, regulated private cannabis retail stores should be available for consumers as soon as possible.

 

7. What will the Expression of Interest look like? What information is required for the Expression of Interest?

The Expression of Interest will be a simple online application that can be completed through an account in the AGCO’s online service delivery portal, called iAGCO.

If you are a sole proprietor, you will need to provide the following information as part of your EOI submission:

  • Legal name
  • Certain personal information (i.e., birth date,  place of birth, driver’s licence information)
  • Contact information
  • Address(es) (mailing, physical and business).

If you are a corporation, limited partnership, partnership, or trust, you will also need to provide the following information:

  • Legal name
  • Legal structure (i.e. indicate if your corporation is privately held, publicly held, a trust or a non-profit)
  • Contact information
  • Addreess(es) (mailing, physical and business).

All Applicants will need to identify the Region where they wish to operate a cannabis retail store.

 

8. For the Expression of Interest Application, will you be required to prove that you have a lease in place?

No, this is not required for the Expression of Interest Application. Please see question 7 above for the information you will need to provide.

However, Applicants who will not be prepared to open a cannabis retail store on April 1, 2019 should not participate in this lottery.  The Expression of Interest Lottery Rules have been established to encourage the opening of stores on April 1, 2019.

 

9. Who is eligible to enter into the lottery?

The lottery is open to the following applicant types: corporation, limited partnership, partnership, trust, and sole proprietor. 

All individuals associated with an Expression of Interest Application, including every director, officer, shareholder, partner and, trustee, must be at least 19 years of age at the time of making a licence application, if notified by the Registrar that they may make a licence application.

Certain classes of individuals are not permitted to submit an Expression of Interest Application to the lottery:

  1. Employees and board members of the Alcohol and Gaming Commission of Ontario;
  2. Employees and board members of the Ontario Cannabis Retail Corporation, operating as the Ontario Cannabis Store;
  3. KPMG LLP, its partners and employees;
  4. Gaming Laboratories International LLC (GLI) employees, owners, and/or board members; and,
  5. The holder or the Affiliate of the holder of a cultivation, processing or nursery licence issued by Health Canada under the Cannabis Act (federal) and the regulations.

Please note, as set out in Regulation 468/18, any applicant who submits more than one Expression of Interest Application with respect to the same Region, will be disqualified. This limit of one Expression of Interest entry per Region applies to an Applicant and any of its Affiliates, the meaning of which is set out in Regulation 468/18.

At any stage during the lottery and following licensing process, if it is discovered that an Expression of Interest Applicant has not followed the Rules, that Applicant will be disqualified from the Lottery Process and any application for a Retail Operator Licence will be considered abandoned or the Registrar will issue a Notice of Proposal to revoke an issued Retail Operator Licence, depending on which stage the Applicant is in.
 

10. What happens if an Applicant is selected through the lottery but the Retail Store Authorization does not pass the public notice process?  Will this operator be able to choose another location or will they lose their opportunity to apply for a Retail Store Authorization? 

If the Retail Store Authorization is not issued as a result of the Public Notice Process, the operator will be able to submit a new Retail Store Authorization application in the same Region as was in their Expression of Interest. An additional Retail Store Authorization fee would be required.

With respect to the public notice process, note that this is an opportunity for prospective cannabis retail store operators to engage with the local municipality and community, and hear any concerns they may have.

Please note that the Registrar will only consider written submissions, as to why the proposed cannabis retail store is not in the public interest as set out in Regulation 468/18 made under the Cannabis Licence Act, 2018.  The only matters of public interest that will be considered are:

  1. Protecting public health and safety
  2. Protecting youth and restricting their access to cannabis
  3. Preventing illicit activities in relation to cannabis.

After the Public Notice period has ended, the AGCO will provide the Applicant with copies of any written submissions received from local residents and from the municipality as a result of the Public Notice Process in response to the application. Authorization applicants will have five (5) days to provide a written response to the Registrar related to any written submissions received from local residents and/or the municipality and the Registrar will consider the applicant’s response, if any.

11. How long will the 25 lottery winners be able to hold a licence?

AGCO Retail Operator Licences and Retail Store Authorizations are valid for two years from the time issued.

After the first two years, licence and authorization holders will be given the option of renewing their licence or authorization for a period of either two or four years.

 

12. In terms of the definition of “Affiliates” in Ontario Regulation 468/18, what if siblings each submitted an Expression of Interest Application, or if spouses each wanted to submit as separate sole proprietorships, would they be considered Affiliates?

The definition of “Affiliate” is complex.

The definition of “Affiliate” relates to corporate / business structures and is not intended to cover blood, spousal, marital, common-law and other familial relationships where no business relationship also exists.

Independent professional advice should be obtained to determine if an “Affiliate” relationship exists.

If a potential applicant to the Expression of Interest lottery is of the opinion that an Affiliate relationship does not exist and the applicant is not in contravention of the Lottery Rules, then the applicant may submit an Expression of Interest application.

If the Expression of Interest applicant is notified by the Registrar that they may apply for a Retail Operator Licence, the Registrar will conduct the eligibility assessment.  If the Registrar determines that there is an Affiliate relationship, the applicant will have an opportunity to provide their opinion to the Registrar.

13. Rule 2 (b) of the Expression of Interest Lottery Rules indicate that applicants or licensee are not permitted, during the lottery period,  to change their applicant type, ownership and/or corporate structure in a way that would result in a change of control of the applicant or licensee.  No mention is made of a franchise agreement.  Does this mean that the applicant or licensee may enter a franchise agreement irrespective of its impact on the control of the applicant or licensee?

No.  Any change in control of the applicant or licensee by any method or process during the lottery period is not permitted.  The reference in the rules to the circumstances of the change in control was intended to be inclusive.  The rule is intended to prohibit a change in control of the applicant or licensee resulting from a change in applicant type, change of ownership, change in corporate structure, the entry into a franchise agreement or any other agreement, court appointment of a receiver, or any other circumstance. 

 

14. A landlord leased his property to someone who was operating an illegal cannabis shop (after Oct 17th). The shop has since closed down. Can the landlord submit an expression of interest? He claims to have no association with the previous tenants other than renting them the space.

The AGCO will use its due diligence to ensure that only responsible and lawful businesses and people receive licenses to own and operate cannabis stores. The applicant is able to submit an expression of interest if they meet all eligibility criteria.

The applicant should also be prepared to comply with requirements under the Cannabis Licence Act, 2018, its regulations, and the Registrar’s Standards for Cannabis Retail Stores. Potential applicants for the lottery are expected to carefully review all the rules to ensure that they are fully aware of, and ready to meet the requirements before submitting their Expression of Interest Application.

 

Costs

15. What costs should I be aware of as I consider submitting an Expression of Interest?

Applicants will be required to pay a non-refundable Expression of Interest fee of $75 when submitting their Expression of Interest Application.

The 25 selected Expression of Interest Applicants will be required to:

  • within five (5) business days of AGCO publishing the lottery results on the AGCO website, submit a Retail Operator Licence Application including a non-refundable $6,000 fee payment; and provide a $50,000 Letter of Credit in the form provided
  • following completion of the Retail Operator Licence application, complete a Retail Store Authorization and pay a non-refundable $4,000 application fee

 

16. Regarding the letter of credit, will I be penalized in the event OCS does not deliver product on time to operate come April 1st?

The Registrar will exercise discretion, but reserves the right to draw on the Letter of Credit in the event that the applicant is unable to sell cannabis under their Retail Store Authorization by April 1, 2019. Applicants must be prepared to demonstrate they are making reasonable efforts to open for April 1, 2019.

 

Allocation of Cannabis Retail Stores

17. What happens to the Expression of Interest applicants who are not selected in  the lottery? Do they need to register again if another lottery takes place in the future?

Ontario Regulation 468/18 provides authority for only the current lottery. The rules governing any additional lottery, if required, will be established separately.

 

Municipalities and Cannabis Retail Store Locations

18. If I am selected in the lottery, can I pick any municipality that has not opted-out to locate my cannabis retail store? 

Ontario Regulation 468/18 sets out the allocation rules for the first 25 cannabis retail stores, which will be distributed among the following five Regions, as follows:

  • Five (5) in the East Region (which includes the following census divisions: Stormont, Dundas and Glengarry, Prescott and Russell, Ottawa, Leeds and Grenville, Lanark, Frontenac, Lennox and Addington, Hastings, Prince Edward, Northumberland, Peterborough, Kawartha Lakes, Simcoe, Muskoka, Haliburton, and Renfrew).
  • Six (6) stores in the Greater Toronto Area Region (which includes the following census divisions: Durham, York, Peel, and Halton).
  • Two (2) in the North Region (which includes the following census divisions: Nippissing, Parry Sound, Sudbury, Greater Sudbury, Timiskaming, Cochrane, Algoma, Thunder Bay, Rainy River, and Kenora).
  • Five (5) in the Toronto Region which means the Toronto census divisions.
  • Seven (7) in the West Region (which includes the following census divisions: Dufferin, Wellington, Hamilton, Niagara, Haldimand-Norfolk, Brant, Waterloo, Perth, Oxford, Elgin, Chatham-Kent, Essex, Lambton, Middlesex, Huron, Bruce, Grey, and Manitoulin).

When interested parties submit an Expression of Interest Application, they will be permitted to submit up to five (5) Expression of Interest entries, one per Region, in which they want to locate their cannabis retail store.

Selected Expression of Interest Applicants will be able to select a municipality within the Region for the location of their cannabis retail store that meets the requirements set out in Ontario Regulation 468/18.  Note that the regulation states that cannabis retail stores may only be located in a municipality that has a minimum population of 50,000 people.

In addition, the provincial government has given Ontario municipalities a one-time opportunity to opt-out of having cannabis retail stores operating within their jurisdiction. Any municipality that wishes to opt-out must do so by January 22, 2019. This means that not all municipalities with a population of 50,000 or more will be an option for operating a cannabis retail store. The list of municipalities prohibiting or allowing cannabis retail stores is continuously updated as the AGCO receives notification from municipalities on their decisions to opt-in or opt-out of having cannabis retail stores in their communities.

 

19. Can I submit an Expression of Interest Application for more than one Region?

An Applicant may submit an Expression of Interest Application and identify up to five (5) Regions for a total of five (5) separate regional Expressions of Interest entries in the lottery (i.e., one per Region).  For example, an Applicant who has identified three (3) of the Regions will have three (3) regional Expressions of Interest entries in the lottery.

Please note, however, that as set out in Regulation 468/18, any Expression of Interest Applicant who submits more than one Expression of Interest with respect to the same Region, will be ineligible to apply for a Retail Operator Licence. In other words, if at any time the AGCO learns that an Applicant submitted more than one Expression of Interest entry per Region, then that Applicant will be disqualified regardless of what stage of the process they may be in and that is up to and including revoking a licence if it has already been issued.

This limit of one Expression of Interest per Region applies to an Applicant and any of its Affiliates, the meaning of which is set out in Ontario Regulation 468/18. To be clear, this means that if “Applicant A” is affiliated with another “Applicant B,” as set out in Regulation 468/18, then only one of them may submit an Expression of Interest in a particular Region.

 

20. For these first 25 licenses, why did you limit the municipalities where a cannabis retail store may be located to a population of 50,000 or over? 

The Government of Ontario has committed to establishing a tightly regulated private retail cannabis model in order to provide a safe, legal alternative to the current illegal market.

In order to combat the illegal market as effectively as possible, regulated private cannabis retail stores are initially being allocated to larger communities to increase accessibility.

 

21. Where can I find the Regional breakdown and a list of municipalities that have a population of 50,000 or over? 

Please refer to the list of municipalities prohibiting or allowing cannabis retail stores. Our website also has a list of those municipalities with a population of 50,000 or over by Region.

 

22. What happens if an Expression of Interest Applicant is selected to make a licence application but the municipality they want to open in decides to opt-out by the January 22, 2019 deadline?  

The 25 Expressions of Interest Applicants selected in the lottery will be able to choose a municipality within their selected Region that is allowing cannabis retail stores.

Please note that, as set out in Ontario Regulation 468/18, cannabis retail stores may only be located in a municipality that has a minimum population of 50,000 or over.

In addition, the provincial government has given Ontario municipalities a one-time opportunity to opt-out of having cannabis retail stores operating within their jurisdiction. Any municipality that wishes to opt-out must do so by January 22, 2019.

If the applicant’s desired municipality has chosen to opt-out, the applicant may choose another municipality in their Region.  Alternatively, under Rule 13.d of the Expression of Interest Lottery Rules, between publication of the lottery results on the AGCO website and January 25, 2019 at 5:00 PM EST, selected Expression of Interest Applicants may provide written email notification of withdrawal to the Register.  If an Applicant does withdraw from the Lottery Process pursuant to this rule, any licence fee payments will be refunded and the Letter of Credit will be returned.  

 

23. Does the lottery apply to both the Retail Operator Licence and the Retail Store Authorization or will it only apply to the latter?

The lottery will determine who may apply for the initial 25 Retail Operator Licences to legally operate a cannabis retail store. Each holder of a Retail Operator Licence will be eligible to apply for one Retail Store Authorization, allowing them to open one cannabis retail store location.

 

Licensed Producers

24. Can Licensed Producers under the Cannabis Act (Canada) participate in the lottery for the 25 cannabis retail stores?

No. As set out in Regulation 468/18, Retail Store Authorizations may not be issued to a licensed producer or an Affiliate of a licensed producer (see Rule 4).

 

25. Am I eligible to participate in the lottery if I hold a federal Health Canada medical cultivation licence? 

The references in Rule 4(e) to a cultivation, processing or nursery licence do not include a ‘licence for sale for medical purposes’  as defined in the federal Cannabis Act.  Nor does this rule include individuals who are registered with Health Canada under SOR/2018-44 Part 14 Access to Cannabis for Medical Purposes to produce cannabis for their own medical purposes or the person that registered person has designated to produce cannabis for them.