Minden Gross LLP lawyers Hayley Larkin and Whitney Abrams summarize the AGCO's recently released Cannabis Retail Store Licensing Expression of Interest Lottery rules on our Canada Cannabis Legal blog.
AGCO Releases Cannabis Retail Store Licensing Expression of Interest Lottery Rules
This afternoon, the Alcohol and Gaming Commission of Ontario (“AGCO”) released its rules for its Cannabis Retail Store Licensing Expression of Interest Lottery (the “Lottery”).
The AGCO has stated that the Lottery is intended to achieve a process that provides a fair and transparent opportunity for potential operators to apply for a license to operate cannabis retail in Ontario, while simultaneously supporting the government’s objective of providing a safe, legal alterative to the illegal market.
As previously announced, the AGCO selected KPMG as the non-biased third party monitor of the Lottery. KPMG will be responsible for overseeing the process and ensuring it runs fairly.
The AGCO will be accepting Expressions of Interest (“EOIs”) to be entered into the Lottery online through the iAGCO Portal between 12:01AM EST on January 7, 2019 and 12:00PM (noon) EST on January 9, 2019. The AGCO has stated that there is no advantage or disadvantage as to the timing of EOI submissions within that window. Each EOI must be accompanied by a mandatory, non-refundable fee of $75.
The Lottery selection will take place on January 11, 2019 and the AGCO intends to publicly release the results of the Successful EOIs 24 hours after the Lottery selection.
Within five (5) business days of the AGCO publishing the Lottery results on its website, Successful EOI applicants must provide the AGCO with both a $50,000 Letter of Credit and a Retail Operator Licence (“ROL”) Application, including a non-refundable $6,000 application fee.
Subject to AGCO regulatory approvals and Ontario Cannabis Retail Corporation supply requirements, the successful applicants must be prepared to sell cannabis under a Retail Store Authorization (“RSA”) on April 1, 2019 and comply with all requirements and regulations under the relevant legislations, regulations and mandates.
Failing to begin operations by April 1, 2019 will come with some serious financial consequences. As mentioned above, a $50,000 Letter of Credit must be provided to the AGCO. If the retail stores are not up and running by April 1, 2019, as in, the applicant is unable to sell cannabis under the RSA at that time, the Registrar may draw on the Letter of Credit based on the following schedule:
- If not operating by April 1, 2019, $12,500 will be drawn;
- If not operating by April 15, 2019, $12,500 will be drawn; and
- If not operating by April 30, 2019, $25,000 will be drawn.
What this means is that applicants submitting EOIs need to be ready to make a serious commitment right off the bat. Under the Lottery Rules, successful applicants will not be permitted to change their applicant type, ownership, and/or corporate structure in such a way that would result in a change of control of the EOI applicant or licensee during the Lottery process. The “Lottery Process” has been defined as the period of time from today to December 13, 2019, when Ontario Regulation 468/18 will be amended.
The following rules pertain to the Lottery and the EOI submission process:
Eligibility and Disqualification
- Corporations, limited partnerships, partnerships, trusts and sole proprietors are eligible to submit an EOI.
- The same legal name must be used in the EOI and the ROL Application, and the corporate structure, applicant type and/or ownership shall not change in any way that would result in a change of control.
- All individuals associated with the EOI (includes directors, officers, shareholders, partners and trustees) must be at least 19 years of age.
- The following are ineligible for the Lottery:
- Employees and board members of the AGCO;
- Employees and board members of the Ontario Cannabis Retail Corporation;
- KPMG LLP, its partners and employees;
- Gaming Laboratories International LLC (GLI) employees, owners, and/or board members; and
- The holder or the Affiliate of the holder of a cultivation, processing or nursery licence issued by Health Canada under the Federal Cannabis Act and its regulations.
5. If the Registrar determines that an applicant has not followed the regulations and/or the Lottery Rules, the applicant will be disqualified, and any pending ROL Applications will be abandoned and any issued ROLs will be revoked.
- Subject to Rule 9, an applicant may submit an EOI and identify up to five (5) Regions for a total of five (5) separate entries in the Lottery (i.e. one per Region)
- The Regions are as follows:
- East Region (allocated 5 stores): 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;
- GTA Region (allocated 6 stores): Durham; York; Peel; and Halton, and excludes the Toronto Region;
- North Region (allocated 2 stores): Nipissing; Parry Sound; Sudbury; Greater Sudbury; Timiskaming; Cochrane; Algoma; Thunder Bay; Rainy River; and Kenora;
- Toronto Region (allocated 5 stores); and
- West Region (allocated 7 stores): Wellington; Hamilton; Niagara; Haldimand-Norfolk; Brant; Waterloo; Perth; Oxford; Elgin; Chatham-Kent; Essex; Lambton; Middlesex; Huron; Bruce; Grey; and Manitoulin
3. Applicants, including affiliates, will be disqualified if an EOI is submitted more than once for the same Region
4. Applicants and affiliates may all submit EOIs as long as they are for different Regions.
- Applicants or their representatives must create an iAGCO account in order to complete the EOI submission. An iAGCO account holder can only submit one EOI;
- EOIs must be submitted to the Registrar online through an iAGCO account, between 12:01 AM EST on January 7, 2019 and 12:00 PM EST (noon) on January 9, 2019, with the $75 non-refundable fee payment.
- Lottery Applications cannot be changed or amended once submitted and the non-refundable fee is paid.
- Lottery applications may be withdrawn. The method of withdrawal depends on the time of the withdrawal.
- The Lottery selection will take place on January 11, 2019 as follows:
- EOIs will be randomly selected using a third-party certified lottery software program;
- There are five Region categories, articulated above;
- Each Region category will have an associated Selected List and a Wait List
- Selected List: number of successful applicants equal to the maximum number of RSAs allocated to that Region
- Wait List: comprised of other first drawn Lottery applications identifying that Region
- EOIs will be randomly selected as follows:
- The first drawn EOI will be placed on the Selected List for the identified Region, or appended to the Wait List in the order drawn if the Selected List is complete;
- If an Applicant has submitted more than one Region, their first EOI will be placed in that identified Region category, any remaining EOIs will become ineligible, unless that Applicant is placed on the Wait List in one region, and subsequently placed on the Selected List in another (see below);
- If an Applicant has submitted more than one EOI and the Applicant’s first drawn EOI is placed on a Wait List for a Region and another Lottery Application is subsequently drawn that identifies a Region that has available store opportunities on its Selected List, then the applicant’s subsequently drawn EOI will be placed on that Selected List. The applicant’s first drawn EOI will be ineligible and removed from the Wait List;
2. The AGCO will contact the applicants on the Selected List and provide them with a Notification Letter from the Registrar.
Steps for Successful EOI Applicants
- All applicants on the Selected List will be required:
- Within five (5) business days of the AGCO posting the Lottery results on its website:
- To provide a Letter of Credit (Letters of Credit will be returned if the applicant withdraws or if the applicant is disqualified); and
- To submit a ROL application with the $6,000 non-refundable fee payment;
- To use the same legal name and applicant type in the ROL Application as used in the Lottery application;
- Following the submission of the ROL, to submit a RSA with the $4,000 non-refundable fee payment;
- To open a cannabis retail store locations that complies with school distance requirement; and
- To be located in a local municipality with a population over 50,000 that permits the retail sale of cannabis.
2. For the duration of the Lottery process (up to December 13, 2019) an applicant on who is first on a Wait List for a Region will be moved to the Selected List for that Region if:
- An applicant on the Selected List is disqualified;
- An applicant for that Region declines the Registrar’s notification;
- An applicant on the Selected List withdraws its application for a ROL; and/or
- A ROL within that Region is refused or revoked by the Registrar.
The Registrar reserves the right to cancel, amend or suspend the lottery, or to amend the Lottery Rules in any way without prior notice or obligation. Any cancellation, amendment or suspension of the Lottery and/or the Lottery Rules will be communicated by the Registrar to the applicants in a timely manner. For more information on the Lottery Rules feel free to visit the AGCO website. Continue to check CCL for any changes that the AGCO may make to the Lottery Rules or the EOI process.
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