Transferring a cannabis retail licence in Alberta

In Alberta, a cannabis retail store licence cannot be handed to a buyer along with the shop. The Gaming, Liquor and Cannabis Regulation says the holder of a cannabis licence may not sell, assign or transfer it, and that a licence sold, assigned or transferred is cancelled. That one rule decides how a store sale gets built. A buyer taking over the premises, the stock and the lease has to hold a licence of its own from the Alberta Gaming, Liquor and Cannabis Commission (AGLC). A buyer purchasing the company that holds the licence runs into a different set of rules, about change in control. This guide takes the two routes in turn and ends with questions to put to the AGLC before signing anything.

The licence itself does not move

Section 111 of the regulation is direct. Neither the holder of a cannabis licence nor a person registered under the same Part may sell, assign or transfer the licence or registration, and if they do, it is cancelled. The section makes no exception for the sale of a whole business. A purchase agreement therefore cannot treat “the licence” as an asset the seller delivers at closing. What it can do is make the buyer’s own licence a closing condition, so that the sale does not complete until the AGLC has issued the buyer’s licence. The AGLC states that anyone who wants to sell cannabis in Alberta must have a retail cannabis store licence.

When the company stays and its owners change

Buying shares instead of assets avoids a licence assignment, but the regulation has its own rules. Under section 112, if a portion of the business that carries out the licensed activities is sold, assigned or transferred and the result is a change in control of the business, the licence is cancelled. Under section 113, a sale of a portion of a sole proprietorship, a partnership or a corporation that is not a distributing corporation, without a change in control, must be reported by the licensee and approved by the board before the effective date. For a distributing corporation, a sale at or above the share set in section 113(2) of the Gaming, Liquor and Cannabis Regulation is reported within 10 business days after the effective date and must also be approved. The board may approve with or without conditions, vary or rescind existing conditions, or refuse. See share sale for the structure itself.

What the buyer’s own application involves

The AGLC’s application page sets out what a new licence needs. All applications go through background checks, which cover the applicant, its associates and its key employees, personally and financially. Municipal approval is required before the AGLC will issue a retail cannabis store licence. The business must be separate from any other business and operate only for the purpose of a retail cannabis store, and it must have a signed lease or a certificate of title for the location. Retailers may only buy cannabis from the AGLC. Ask the seller which of these the existing store already satisfies, and which depend on the buyer’s own people and premises.

Financial interests and the premises

Section 114 deals with money that does not arrive through a sale. Under section 114 of the Gaming, Liquor and Cannabis Regulation, when a person acquires a financial interest in the licensee, its business or its premises in some other way, the licensee must report it to the AGLC within 10 business days of the interest being acquired. A vendor loan, an investor or a lender taking an interest in the business could fall within that wording, so read the section against the financing plan. Check the seller’s lease and any liens as well. Alberta’s personal property registry lets a person register, change or search for personal property used as security against a loan, so search the seller’s name before closing and ask for discharges of anything the buyer is not assuming.

If the seller cannot carry on

Section 115 covers a licensee that, through bankruptcy or operation of law, becomes dispossessed of the business. The licence is cancelled, but the board may issue a temporary licence to a person to carry on the licensed activities, on conditions. Under section 115 of the Gaming, Liquor and Cannabis Regulation, a temporary licence is valid for three months or until the cancelled licence would have expired, whichever is later, and its holder may apply for a new licence while it is in force. A buyer approached about a distressed store should ask whether the seller’s licence is still in force before discussing price. The AGLC’s bulletin on reporting ownership changes is written for gaming licensees, not cannabis stores; it asks them to email its Due Diligence unit before a sale is completed, so ask the AGLC whether it wants the same for a cannabis store.

Questions to ask before signing

• Is the buyer applying for its own licence, buying shares, or both, and which of sections 111 to 114 applies to that structure?
• Can the closing condition be tied to the AGLC issuing the buyer’s licence, with a fair outside date if the review runs long?
• Has the municipality given the approval the AGLC requires, and will it treat the buyer as a new applicant?
• Is the lease assignable to the buyer, and does the buyer hold a signed lease or title in its own name at the right time?
• Which liens are registered against the stock and equipment, and who discharges them at closing?