Pubdate: Wed, 08 Jul 2015
Source: National Post (Canada)
Copyright: 2015 Canwest Publishing Inc.
Contact: http://drugsense.org/url/wEtbT4yU
Website: http://www.nationalpost.com/
Details: http://www.mapinc.org/media/286
Author: Julius Melnitzer
Page: FP6

POT A CORPORATE LAW GROWTH INDUSTRY

They can't just dispose of pot in insolvency proceedings

Medical marijuana generating plenty of opportunity

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 licenses 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 allstock 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.

"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 got 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 non-conforming" use that pre-dated 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. The 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: Matt