Transferring a cannabis retail licence in Manitoba

Manitoba’s rules for a cannabis store licence sit in The Liquor, Gaming and Cannabis Control Act, and they tie the retail licence to a store agreement. A retail cannabis licence may be issued to a person who has entered into an agreement with the Manitoba Liquor and Lotteries Corporation (MLLC), and it is valid only while that agreement is in force. On top of that, a transfer or assignment of a licence needs written consent. A buyer therefore has to look at the licence, the agreement and the consent together. This guide walks through each and lists questions for the Liquor, Gaming and Cannabis Authority of Manitoba (LGCA).

The licence rests on a store agreement

Section 101.3 of the Act lets the MLLC enter into an agreement with a person to establish and operate a cannabis store. Under section 101.4, the executive director of the LGCA may issue a retail cannabis licence to a person who has entered into that agreement. Section 109(2) then says that, despite the usual licence term, a retail cannabis licence is valid only while the holder’s agreement is in force. The sections read for this guide do not say what happens to the agreement in a sale, so the agreement’s own terms matter. A buyer should ask for the agreement itself and ask the MLLC and the LGCA how a change of operator is handled.

Consent to transfer or assign

Section 110(1) is short: a transfer or assignment of a licence is not valid without the written consent of the executive director. That makes consent a gating item, not a courtesy. In an asset sale where the licence is meant to move, build the closing around the written consent, with the dates and the form of the consent agreed in the purchase agreement. Do not assume consent is a formality, and do not let the seller treat it as one. Section 110(1) does not say on what basis the executive director gives or withholds it, so ask what the LGCA looks at, and what it needs from the buyer, before the price is settled. Agree in the purchase agreement what happens if consent is refused or delayed, including who may walk away and whether any deposit comes back.

When control of the holder changes

Section 110(2) covers a sale of shares. A licence ceases to be valid if there is a prescribed change in control of the holder, unless the executive director approves the proposed change in accordance with the regulations. The Act leaves it to the regulations to say which changes count, and a buyer should not guess. Ask the LGCA, in writing, whether a purchase of the holder’s shares, a new director or a new lender with rights over the business counts as a prescribed change, and what has to be filed and approved before closing. See share sale for how that structure differs from buying assets.

Liquor and cannabis are not the same page

The LGCA’s page on the General Liquor Service Licence says that liquor licences cannot be transferred. Section 110(1) of the Act uses wider wording, a transfer of a licence being invalid without consent. Do not carry the liquor message over to a cannabis store, or the reverse. Ask the LGCA which route it expects for a retail cannabis licence on a sale, and whether it would rather the buyer apply for a new licence. The LGCA publishes terms and conditions for licensed cannabis retailers, so ask for the current version and check the buyer can meet them from the first day of operation. If the seller’s store has any open compliance matters under those terms, ask what they are.

The location and the security

A retail cannabis licence authorizes the holder to sell to customers at the premises specified in the licence (and for delivery under the regulations), and section 101.5(1) requires a separate licence for each location where a person operates a cannabis store. Section 101.5(2) lets the executive director authorize in writing an additional or different location for a specified period. A move to a new site is therefore a different question from a sale at the same address, so the lease deserves the same scrutiny as the licence. Manitoba’s Personal Property Registry is where creditors register notices of a security interest, called a lien, in personal property. Search the seller before closing, and require discharge of anything the buyer is not assuming.

Questions to ask before signing

• Will the MLLC agree to the buyer taking over the cannabis store agreement, or must the buyer sign its own?
• What written form does the executive director’s consent take, and how long does the LGCA expect it to take?
• Which changes in the holder’s ownership are prescribed changes in control, and what approval do they need?
• Does the lease cover the premises named in the licence for as long as the agreement runs?
• Which registered liens affect the stock and equipment, and who clears them at closing?