Business Venture Blog
This is where we post about business, ventures, law, and business venture law.
Anything interesting, really.
Anything interesting, really.
How to Sell Pot in Alberta…Legally.
The Prohibition is Almost Over
March 6th 2018 marks a historic day for Alberta. It was on this day that applications began to be accepted for the private retail sale of cannabis in the Province. Budding entrepreneurs have been waiting for this ever since Bill 26 received royal assent. Under the bill, Alberta rejected the arcane idea held by some provinces (Nova Scotia, New Brunswick, PEI) that the local government should be in complete control of all retail sales. With applications now open, and the release of guidelines for retail sale, the path has now become much clearer for a new breed of entrepreneur that dreams of promoting their combustible herbage on grand scale.
This article will provide a high-level overview of the Alberta Government’s requirements for individuals, businesses or organizations that wish to apply for a retail cannabis store licence. For more detailed information interested individuals are encouraged to refer to the Alberta Gaming and Liquor Commissions Retail cannabis store handbook found at: https://aglc.ca/cannabis/retail-cannabis-store-licences/retail-cannabis-store-handbook.
Not so fast. The Alberta government has made a clear commitment to keeping cannabis out of the hands of children, limiting the illegal drug trade, while also protecting public health and safety. These commitments form the backdrop for all of the following application requirements:
The Alberta Gaming and Liquor Commission (“AGLC”) will conduct personal and financial background checks of all applicants, associates and key employees of the applicant. Key employees include all individuals that control daily operations, have decision-making powers, and those who have the authority to hire or terminate the employment those within the business (i.e. executives, managers, owners, key holders).
The AGLC reserves the right to refuse, or terminate a cannabis license if the applicant, any of the applicant’s key employees, associates, or any person or entity connected to or associated with the applicant:
Municipal Approvals & Business/Retail Requirements
The applicant will also need to ensure that they obtain municipal approval regarding zoning, land use-restrictions, while also maintaining specific business/retail requirements before the AGLC will issue a retail cannabis store license.
Zoning/Land Use: A retail cannabis store must not be located within 100 metres of a school, health care facility, or a parcel of land designated as school reserve.
Business Requirements: The business must be incorporated in Alberta or extra-provincially registered in Alberta. It must be separate from any other business and must only operate for the purpose of the retail sale of cannabis. Further, the applicant must have a signed lease or certificate of title.
Retail Store Requirements: The retail store must have zero visibility into the store from outside, an alarm system, secure product display, secure storage area, video surveillance system and must only purchase cannabis from the AGLC. Non-cannabis items will need AGLC approval before sale. Drive-through windows are prohibited. Further, the AGLC policy has recently been updated to state that any term, symbol or graphic normally associated with medicine, health or pharmaceuticals are prohibited in a store name or signage.
The following fees are due at the time of application:
Questions? Reach Out.
If you or someone you know wants to know more about the legal cannabis retail space in Alberta or elsewhere please do not hesitate to reach out to one of our students at the BLG Business Venture Clinic. We can sort through the legal mumbo gumbo with you, and answer any questions that you may have.
James Hamilton is a 3rd year student at the University of Calgary Faculty of Law and is a caseworker at the BLG Business Venture Clinic. He leaves the U of C with an articling position at Forté Law Droit in Moncton, New Brunswick.
Dual-Class Voting Share Structures
Dual-class shares: what are they?
Dual -class voting share structures are on the rise in North America. In the United States, an increasing number of companies, especially in the tech sector, are adopting dual-class structures, including powerhouses such as Google, Linkedin, Facebook and Snap Inc. Despite strong pressure from “one share, one vote” activists, who argue that such arrangements undermine shareholder democracy, dual-class stock structures are on the rise: in 2015, 15% of U.S. IPOs had “weighted voting rights” while only 1% of them did in 2005.
Dual-class voting structures are distinct from the classic single-class structure, which gives each share equal voting power. Dual class voting stock structures involve two or more classes of shares – one of which has considerably more voting power than the others. For example, one class A share of Bombardier Inc., which are held exclusively by Bombardier’s controlling families, carries 10 votes, while each common share carries a single vote.
What are their advantages?
By holding on to their “supervoting” shares, the controlling shareholders have the option of “unloading” a high percentage of their shares while maintaining control of their company. For example, Mark Zuckerberg, Facebook’s CEO, sold $356.8 million worth of Facebook shares in February 2018 to fund his philanthropic efforts. Since Zuckerberg’s preferred shares have ten times the voting power of ordinary shares, he can do so without risking giving up the control over his company.
Dual class shares structures allow entrepreneurs such as Zuckerberg to execute their long-term vision without being at the mercy of investors. In 2014?, Zuckerberg acquired Instagram for $1 billion; Zuckerberg closed the deal without consulting his board of directors. Why would he? Since he owns a large majority of the shareholder votes, he is answerable only to himself. Zuckerberg's acquisition was (very) worthwhile: in March 2018, Instagram was estimated at $35 billion dollars. Dual-class voting companies enjoy other perks: they are almost totally protected against takeovers such as poison pills, and they are not at the mercy of activist hedge funds.
While dual-class voting share structures come with a number of benefits, they have raised a number of concerns. First, uneven voting structures can lead the supervoting share owners to make decisions to maintain power while disregarding the best interests of the business, undermining shareholder democracy. When Snap Inc. went public in 2017, it was heavily criticized for offering shares with zero voting rights. Also, dual-class structures can lead to the “elderly leader problem,” a situation that occurs when an elderly leader is perceived to lack the competence to hold voting control. However, this is highly unlikely in an early start-up scenario.
The current Canadian landscape
In Canada, companies with a dual-class voting share structure have posted annual returns of 12% over the past 10 years, almost twice as high as their single-class counterparts who have shown a 7% return over that timespan. While dual-class structures are criticized, and banned from certain stock exchanges, they have a proven track record and can be very beneficial for early start-ups with solid founders. Early tech start-ups should consider dual-class voting structures to be able to execute their long-term vision while avoiding constant investor pressure and hostile takeovers.
Boris Degas is a 3rd year law student and caseworker at the BLG Business Venture Clinic.
2018 Hunter Hub Silicon Valley Tour
Being selected to participate in the inaugural Hunter Hub Silicon Valley Tour has been a rewarding and invigorating experience. As a law student who has been working with the BLG Business Venture Clinic for nearly a year, I have received some exposure to the start-up industry within Calgary. I applied for the SV Tour with the intention of gaining a better understanding of what drives success in entrepreneurship in the Bay Area and planned to use that knowledge in my legal practice. I came out of this experience confident that I could use my knowledge to assist my future clients in their business endeavours but even more so, confident that I possessed key information that would support me in beginning my own venture. I wrote this blog post as a reflection for the Hunter Hub for Entrepreneurial Thinking in the hopes that the agenda and lessons learned are inspiring for any potential participants.
The tour officially began with a standing reception at a trendy San Francisco restaurant where Cathy Han, the co-founder and CEO of 42 Technologies Inc., and Sean Lynch, the co-founder of TapEngage, spoke about their experience as entrepreneurs. As the first event, this was an extremely informative and engaging talk that motivated the inspired attitudes that persisted throughout the tour. It was at this first event that I understood how important connections were in the Valley and how close-knit the Canadian community was within San Francisco. It was amazing to realize that Canadian entrepreneurs were eager to share their connections and to help each other in any way they could. This collegial attitude was echoed by every Canadian we met during the tour, and really resonated with our group. We knew that if we were ever to come to the Valley, there would be people there who would help us find our bearings.
The next day, our tour continued with a visit to 500 Startups, Rocketspace, and Azure Capital. While all of the companies provided insight into the inner workings of Silicon Valley’s functionality, it was Rocketspace that stood out that day. With a new office coming to Calgary, I was excited to see how the accelerator operated and what their overall environment was like for entrepreneurs. When we sat down to talk about the accelerator, the founder dropped in for a surprise visit to discuss the ambition that was required to succeed in competitive markets. One of the most important lessons that he conveyed was how necessary it is to focus on your goals, and to ignore the negative reviews you may receive. I walked away from the discussion with the understanding of how important it was to be resilient. I think ambitious people will always make enemies, but it is imperative to have the ability to withstand criticism and hurtful comments.
The night ended with a University of Calgary alumni event at Harper & Rye, and the next morning we were up and ready for another full tour day. The agenda was full with tours at Canvas, Uber, iNovia, Microsoft, and Relay Ventures. While every company and firm was impressive, my favourite part of the day was hearing from Norman Winarsky, the co-founder of Siri. The day had exhausted me, and I was honestly unsure if I would be able to pay attention to another discussion, but Norman was so engaging that I was listening to his every word. It helped that he had a great sense of humour, too. Norman discussed the importance of a good team in the Valley and how increased competitiveness has made it necessary for entrepreneurs to have an unfair advantage if they want to be successful. In considering this unfair advantage, he talked about traction and how necessary it was to be different. His knowledge of the Valley and artificial intelligence technology was unparalleled. It was a privilege to be able to ask him questions and hear his thoughts. We ended that day with a private group dinner, buzzing with excitement over the day we had just had.
Our second to last tour day was packed with a trip to Draper University, Shopify, and the C100 Event. One of the best things about doing this tour and meeting so many Canadian entrepreneurs at each company was then getting to reconnect with them at the C100 Event. This really confirmed the very first lesson I was taught on this trip – the Canadian network is very tight-knit and people want to help you succeed. It was wonderful to get to chat with a collection of intelligent people, hear about their ventures, and discuss our own goals. It was a great evening that inspired thoughtful conversation and encouraged entrepreneurship.
The Silicon Valley tour has been a highlight of my academic career and I feel confident that I have partaken in a tour that has equipped me with knowledge that I can use in my future legal career. Further, I feel more assured than ever that Canadians are capable of succeeding in the entrepreneurial market and that we are just as prepared as any other nation, if not more so. Touring the Valley has been engaging, informative, and fun. I recommend it for anyone who is passionate about business in any form and wants to learn about what makes an entrepreneur successful.
UToday's article on the tour can be found at: http://www.ucalgary.ca/utoday/issue/2018-03-08/silicon-valley-tour-puts-students-nucleus-startup-culture?utm_source=UToday&utm_medium=Email&utm_campaign=March-8-2018&utm_term=Silicon%20Valley%20tour%20puts%20students%20at%20the%20nucleus%20of%20startup%20culture.
Kayla Dhaliwal is a 3rd year student at the University of Calgary Faculty of Law. She was an inaugural participant in the Hunter Hub Silicon Valley Tour, worked at the BLG Business Venture Clinic for the 2017 summer session, and is a caseworker at the Clinic for the 2017-2018 school year.