
Sam Wu

Kristjan Surko
Rueters LLP 2200-250 Yonge Street Toronto, Ontario M5B 2L7 Tel: 416-597-5401
The legalization of cannabis in Canada is right around the corner with the proposed Cannabis Act, Bill C-45, slated for a final Senate vote. The proposed Act will create an entirely new regulated industry which offers both significant opportunities and significant risks for businesses selling cannabis, cannabis accessories, or related services, and their directors and officers. The proposed Act creates exceptional liability risks for corporations and their directors and officers. For example, directors and officers can be personally liable for offences (punishments for indictable offences can be a fine of up to $5,000,000 or imprisonment for up to three years or both) and violations (administrative monetary penalties for violations can be up to an extraordinary $1,000,000). In the case of administrative monetary penalties, the proposed Act expressly removes the defence of due diligence or mistake of fact, creating a strict liability offence. As the cannabis industry explodes, corporations, directors and officers need to be aware of and manage the distinctive liability risks created by the proposed Act. Corporations, directors, and officers should also be aware of different ways to defend against criminal prosecutions and resolve violations and administrative monetary penalties. This article reviews the different offences and violations under the proposed Act that corporations, directors, and officers can be liable for; punishments for offences and administrative monetary penalties for violations; and potential defences and defence strategies. Offences and violations under the proposed Act Offences and violations under the proposed Act include:- Contraventions of provisions prohibiting, among other things:
- Promotion, packaging, and labeling in a way that appeals to youths or evokes glamour, recreation, excitement, vitality, risk or daring;
- Promotion, packaging and labeling through sponsorship, testimonials, or endorsements, or depictions of persons, celebrities, characters, or animals;
- false, misleading or deceptive promotion, packaging, and labeling of cannabis likely to create an erroneous impression about its characteristics, value, quantity, composition, strength, concentration, potency, purity, quality, merit, safety, health effects or health risks;
- false, misleading or deceptive promotion of and packaging and labelling of cannabis accessories likely to create an erroneous impression about their design, construction, performance, intended use, characteristics, value, composition, merit, safety, health effects or health risks;
- promotion using foreign media;
- displaying a brand element on a sports or cultural events facility;
- providing or offering to provide cannabis or cannabis accessories for free or in exchange for the purchase of a thing or service or the provision of a service;
- providing or offering to provide a service or any thing that is not cannabis or a cannabis accessory if it is an inducement to purchase cannabis or a cannabis accessory;
- sale or distribution of cannabis subject to a recall order;
- sale or distribution of cannabis or cannabis accessory by self-service display or a dispensing device,
- obstructing an inspector, and
- making, or participating in, assenting to or acquiescing in the making of, a false or misleading statement in any record required to be prepared, retained or provided under the statute.
- Contraventions of provisions regarding:
- compliance with license conditions;
- cessation of activities related to the suspension of a license; and
- making available to the public information about cannabis.
- Contraventions of regulations or orders to provide the Minister information, recall, conduct tests, or take measures.
- Compliance Agreements
- Request for Reviews
- the person’s history of compliance or non-compliance with the Act and regulations;
- the nature and scope of the violation;
- whether the person made reasonable efforts to mitigate or reverse the effects of the violation;
- whether the person derived any competitive or economic benefit from the violation;
- and, any other prescribed criteria – presumably indicating regulations will add further relevant factors for consideration.
- Limitation defence