Canada’s New Marijuana Licensing Guidelines Favors Rich Firms, Says Trade Consultants

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In keeping with a report by Reuters, business specialists say {that a} new licensing course of for authorized cannabis producers in Canada limits the power of smaller corporations to draw funding, which might go away the fledgling business dominated rich corporations.

The rule modifications for licensing happened after Well being Canada, the federal well being company answerable for the licensing course of, was swamped by purposes for licensed producers, placing a pressure on its assets and inflicting months of delays for candidates. The company has obtained over 800 purposes for cannabis licenses since 2013. Of these, 457 handed the preliminary paper-based evaluate, however 70% of them have but to point out proof they’ve constructed a facility.

This backlog is “contributing to attend instances for extra mature purposes and an inefficient allocation of assets,” Well being Canada spokeswoman Tammy Jarbeau mentioned.

In keeping with Reuters, the licensing course of has come underneath elevated scrutiny since CannTrust Holdings (TRST.TO) revealed this month they have been being investigated by Well being Canada for promoting marijuana grown in unlicensed services.

Beneath its new system, Well being Canada requires a brand new facility to be absolutely constructed earlier than one can apply for a license, transferring away from a course of underneath which an organization might apply for approval after assembly sure milestones.

Trade insiders mentioned the brand new guidelines are making the market much less accessible for smaller companies.

“That just about put lots of people out of the operating of even making use of anymore,” Mathew Columbro, president and co-founder of Vindica Hashish Corp, a strategic consulting agency for corporations within the cannabis business.

Beneath the prior system, corporations would leverage milestones achieved within the utility course of to draw funding for the following steps, Columbro mentioned.

STARTING SMALL
Now to even apply to sometime promote cannabis merchandise, an organization will need to have a rising facility constructed with none assure it would obtain the license that may make the ability authorized and probably worthwhile.

Columbro mentioned it isn’t but clear whether or not the modifications will have an effect on provide.

Dentons Canada lawyer Eric Foster mentioned a number of of his shoppers, as a direct results of the regulatory change, at the moment are trying to construct comparatively small rising services of just some thousand sq. toes.

“This can assist cut back the upfront capital prices and likewise velocity up the licensing course of as it would take much less time to construct a smaller facility than a bigger one,” Foster mentioned.

As soon as their license is authorized, the businesses will be capable to extra simply increase extra capital for expansions and construct out extra, he mentioned.

Trade analysts, attorneys, and producers mentioned the brand new system is just not essentially a nasty factor as it would liberate Well being Canada time and assets for extra critical candidates.

“It filters out those that can’t get their affairs so as,” Norton Singhavon, Chief Govt of GreenTec Holdings, mentioned. “The egocentric a part of me, I truly like that.”

GreenTec, which operates in any respect ranges of the cannabis provide chain, is reaping the advantages of getting within the door previous to the regulatory change, Singhavon mentioned.

The corporate has filed license extension purposes for a number of small cannabis farms it lately acquired. With the brand new build-to-apply requirement, Singhavon mentioned GreenTec is experiencing barely sooner turnaround instances for its purposes.

However Singhavon, whose firm began in 2017, mentioned GreenTec wouldn’t have survived with out having the ability to entice traders because it achieved early milestones within the unique licensing course of, significantly when it was going public in 2018.

“Thank God this machine got here in when it got here in,” he mentioned.

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