Advertising Medical Marijuana in Canada Similar to Advertising Any Other Narcotic

Health Canada is licensing private producers to produce and sell medical marijuana under Canada’s new Marihuana for Medical Purposes Regulation (“MMPR”).   Since marijuana is a narcotic, the advertising and promotional activities available to marijuana producers licensed under MMPR are the same as those available to pharmaceutical companies in Canada.

The Narcotics Control Regulation (Canada) (“NCR”), s. 70, prohibits “any advertisement to the general public respecting a narcotic”.    The term “advertisement is defined broadly to encompass any “representation” that “directly or indirectly” promotes the sale of a narcotic.  It is not advertising per se that is prohibited but advertising to the “general public”.   The NCR also requires that any advertisement include the symbol “N”, “clearly and conspicuously”, to put consumers on notice that what is being advertised is a narcotic.

How are licensed medical marihuana producers to reach customers? The Distinction Between Advertising and Other Activities (the “Drug Ad Policy”) policy statement issued by Health Canada to provide guidance to the pharmaceutical industry potentially provides some important guidance on promotional activities from press releases to consumer brochures to journal supplements.   In the Drug Ad Policy, Health Canada draws the distinction between advertising to promote the sale of a drug and activities that are not primarily intended to promote the sale of a drug (e.g., education, scientific exchange, labeling, shareholder’s report, etc.), the former being prohibited and the latter being permitted to be made to the general public.  Licensed medical marijuana producers are encouraged to review and observe the Drug Ad Policy.

In addition, licensed medical marihuana producers should also educate themselves on the labeling and packaging  requirements set out in the Food and Drug Act (Canada) (the “FDA”).   Specifically, the FDA prohibits labelling, packaging or selling in a manner that is false, misleading or likely to create an erroneous impression about the character or safety of the drug. For example, unsubstantiated health claims cannot be put on product packaging.

The MMPR also imposes certain obligations on medical marihuana licensed producers regarding advertising.  Under Section 16 of the MMPR “A licensed producer must include their name, as set out in their licence, on all the means by which the producer identifies themself in relation to cannabis, including advertising, product labels, orders, shipping documents and invoices.”

If you have any questions or would like more information regarding advertising medical marijuana in Canada, call or email Koby Smutylo at 613 869 5440 or koby@lawyercorporation.ca.

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Frequently Asked Questions Regarding Canadian Certification of Radio Equipment

Answers to frequently asked questions regarding Innovation, Science and Economic Development Canada (formerly Industry Canada) wireless certification can be found here.

Radio Equipment Certification – When is Innovation, Science and Economic Development Canada (formerly Industry Canada) certification required?

It is the final production model that must comply with the applicable Radio Equipment Certification requirements.  See Category I Equipment Standards List for specific information regarding what radio equipment is subject ot certification by Industry Canada.

Radio equipment imported only for demonstration or trial purposes does not need to be certified.  However, such equipment may require a developmental radio license.  Contact Innovation, Science and Economic Development Canada (formerly Industry Canada) for more information.

Information regarding the application is available on Innovation, Science and Economic Development Canada’s website.  Each applicant must provide the name, contact information and Innovation, Science and Economic Development Canada (formerly Industry Canada) registration particulars for such applicant’s representative in Canada.  The representative must be a person capable of responding to Innovation, Science and Economic Development Canada enquiries and who, if required, can provide post-certification audit samples at no charge to Innovation, Science and Economic Development Canada.

We are pleased to be the Canadian Representative for many new radio equipment technologies.  For more information regarding our services, click here.

 

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Moving! Now Located at 340 Gilmour St., Ottawa

As of January 1, 2014, our office is moving to 340 Gilmour Street, Suite 400, Ottawa, Ontario, K2P 0R3.   The new office is in the boutique newly-renovated building we are sharing with Eugene Meehan’s Supreme Advocacy LLP law firm.  340 Gilmour St. is a heritage building beautifully renovated to be modern and bright.

Our move to a modern boutique space reflects our recognition that while our clients enjoy receiving high-quality legal services they also appreciate our unique practice model.   By leveraging technology, external service providers and our relationships with finance and other legal professionals our law firm model meets the needs of our professional and business entrepreneurial clients.   Put simply, we are embracing what our clients tell us they like about how we practice law!

 

Franchise Disclosure Law Coming to British Columbia

In 2013, the British Columbia section of the Canadian Bar Association called for introduction of franchise disclosure legislation into British Columbia and the BC Law Institute called for comments on a Consultation Paper published by them.  Members of the Canadian franchise law bar predicting franchise disclosure law in BC by 2016.

Estates and Testamentary Trusts To Lose Favourable Tax Rate Treatment

A testamentary trust is a trust arising on and as a consequence of the death of an individual.  Canada Revenue Agency (“CRA”) confirmed in a technical interpretation (2011-0422471E5) that an estate is treated by CRA as a testamentary trust for purposes of the ITA and will cease to exist only when all the assets are distributed to the beneficiaries.   Currently, an estate and other testamentary trusts, such as a spousal trust, are taxed at graduated rates similar to an individual.  Other trusts (ordinary inter vivos trusts) pay tax at the top federal marginal tax rate applicable to individuals.

For 2013, the graduated rates are 15% on the first $43,561 of taxable income, 22% on the next $43,562 of taxable income (on the portion of taxable income over $43,561 up to $87,123), 26% on the next $47,931 of taxable income (on the portion of taxable income over $87,123 up to $135,054), and 29% on taxable income over $135,054.

Some estate planners have used this favourable tax treatment given to testamentary trusts to “income split” between the estate or trust and its beneficiaries.   For example, by creating a testamentary trust structure which has a distribution scheme that allows for discretionary payments of income to its beneficiaries and also permits accumulation, subject to certain anti-avoidance rules (see subsection 104(2) of the ITA), such a trust can both distribute its income to its beneficiaries and/or retain income in the trust, thus minimizing the amount of tax paid overall by taking advantage of the trust’s and the beneficiaries’ respective graduated rates.   In addition, subsection 104(13.1) allows a trust to choose to have distributed income taxed in the trust rather than in the hands of the beneficiary.

In the Federal Government of Canada’s 2013 Budget, the Government announced its intention to apply the top marginal rate of taxation to testamentary trusts, including spousal trusts, and estates, though in the case of estates the graduated rates would continue to apply for 36 months after the death of individual.   The proposed changes were published for public consultation until December 2, 2013.   These changes are proposed to come into effect in 2016.  Draft legislation has not yet been released.

In response to these changes, we recommend Wills that create testamentary trusts provide estate trustees with discretion to be able to distribute as much income as they consider advisable in order to access the marginal rates of the beneficiaries of the trust.

 

Registered Education Savings Plan (RESP) Vulnerable to Creditors – Unlike RRSPs

When you set aside money for your children through an RESP you should do so with the knowledge that the funds you deposit into the RESP are vulnerable to creditors.  A RESP is not a trust and, unlike an RRSP or a trust, the assets held in the RESP do not meet the definition of trust property as contemplated by the Bankruptcy and Insolvency Act (Canada) and are therefore not creditor-proof.  A trustee-in-bankruptcy of a parent can collapse an RESP maintained by the parent for his children.  If this happens, not only may creditors realize against the RESP assets but any government money in the plan is lost on the collapse of the plan.

A Rough Guide to Starting a Business Legal Expenses

We frequently take calls from entrepreneurs wondering about the legal expenses they should expect to incur in starting a business.  Sometimes the business has been operated as a sole proprietor and the entrepreneur recognizes it is time to incorporate a business and other times the entrepreneur is starting a business fresh.  The calls typically follow the same general path: first we are asked about the necessary steps (i.e. incorporation, banking, financing, shareholder agreements, etc…) and second we are asked how much taking those steps to start the business will cost.  While every business is unique and the start-up costs vary somewhat from business to business, in this post, we provide some rough guidance regarding what to expect when it comes to business start-up legal expenses.

Incorporation

You should budget $1,200 to $1,500 for incorporating your new business.  Legal fees are roughly $900, more or less depending upon complexity of the share structure.  Disbursements – i.e. expenses incurred by your lawyer in connection with the incorporation – , including name reservation, incorporation filing fee, name reservation report (if applicable) and minute book binder total $500 more or less.  Savings can be had by choosing the following:

  • incorporating federally and you will save $100 because the government filing fee is less;
  • incorporating using a numbered company (i.e. 1234567 Canada Inc.) and you will save the $56 NUANS name search report fee; and
  • tell us you don’t want a fancy minute book binder and you will save approximately $125.

In addition to the saving opportunities listed above, you can avoid the incorporation legal fees altogether by preparing and filing the incorporation yourself, but in our experience often the share structure isn’t set up correctly for the business start-up and articles of amendment need to be filed, which cost approximately the same as hiring us to do the incorporation in the first instance.

The incorporation fees quoted above include the initial set-up of the corporation, including resolutions, share issuances and registrars.

Financing Agreements

The type of financing agreements a start-up will need will of course depend upon how the business will be financed.  Financing options generally include shareholder loans, equity or debt investment from angel investors and bank debt.    Providing an estimate of the cost of legal fees for financing agreements is not easy because of the diverse range of financing options.   In addition to the cost of preparing the financing agreement for the start-up there are typically also legal expenses associated with the financing transaction itself.  For example, an equity financing by angel investors (be they accredited investors or friends and family) will involve a subscription agreement, corporate authorizing resolutions and other transaction documents.  Moreover, the terms of the financing may be extensively negotiated with the investors or a broker-dealer representing the investors, which will further increase legal costs.   By way of rough guidance, budget $3,000  to $7,500 for an equity round of financing or a bank debt financing.  If the start-up is financed by shareholder loans, the cost will be much less i.e. $500 to $2,500, depending upon various factors including whether or not the shareholder will take security over the assets of the business.

Shareholder Agreement

If the business we incorporate for you is a professional corporation or a single owner-operator business, you will not need a shareholders agreement.  However, if there are multiple arms-length shareholders, we strongly recommend a shareholders agreement.  Since shareholders’ agreements are long and tend to be reviewed and revised extensively to suit the business shareholders’ preferences, lawyers typically charge anywhere from $1,500 to $5,000 to prepare a shareholders agreement.

Next Steps 

If you are starting a new business, we would be pleased to give you a more precise idea of how much to budget for legal fees.    We don’t charge for this valuable service and, best of all, if we give you a quote and you go forward with us, you can rest assured that, barring rare extraordinary situations, your ultimate bill will be the amount we quoted.  No unpleasant surprises.

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We’re proud to be the Canadian Representative for Anki DRIVE!!

Recently, we were retained to be Anki’s Canadian Representative in connection with its application to Innovation, Science and Economic Development Canada (formerly Industry Canada) for wireless certification in Canada.  We are proud to be a small part of  bringing this exciting new technology to Canada.  Thank you, Anki!

According to the product description on the Apple Store, “Anki DRIVE uses Artificial Intelligence (AI) to deliver the first video game in the real world. Each car has been engineered to think: It knows where it is, makes decisions, and drives itself. Using your iPhone, iPod touch, iPad, or iPad mini you can take control of a car to play against friends or AI cars. But watch your back.  Anki DRIVE AI cars have been designed to take you out.”

For more information about Anki DRIVE, see http://store.apple.com/ca/product/HD003VC/A/anki-drive-starter-kit.

 

Investors: Get Legal Advice and Representation Before You Invest

Recently we were consulted by a doctor (here, we’ll call him the “Investor”) that had made a large investment (i.e. >$500k) into a property development project.   The client was concerned that nearly 3 years had past since he wrote the large cheque and the property remained undeveloped.   He wanted to know his options for confirming the developer was diligently working on the project and, if not, how he could get his his money back.

My first question to the Investor was “Did you have a lawyer represent you on the investment?”  I asked this question for two reasons: 1) the structure of the investment was more likely to be in his favour if he had legal representation and 2) if he was represented by a business lawyer or attorney and still wasn’t protected correctly he may have a recourse to the lawyer’s insurance policy if the investment was bad.  Secondly, I asked the Investor to show me all the “paper” that was given to him and/or signed as part of his investment.  In the case of an equity investment, I want to see the term sheet, subscription agreement, share certificates, articles of incorporation of the company in which in the investment was made and any other documents that were exchanged as part of the investment.  In the case of a loan investment, I want to see the term sheet (if any), the loan agreement and/or promissory note, the general security agreement, mortgage, etc…  In either case, for the company in which the investment was made I want to review all available financial statements, bank statements, property title documents, ppsa reports, etc…    The contents of these documents determine an investor rights and remedies.

In the case of our doctor client, a lawyer did prepare the transaction documents, which included a shareholders agreement, subscription agreement and share certificates.  This same lawyer  incorporated a company for the doctor to use for his investment.  Did this lawyer represent the doctor on the investment?  The doctor-investor may have thought so, but the typical protections were absent from the documents we examined.  Specifically, the shareholders agreement did not require the investor shareholder’s approval of any corporate action nor did it give our investor a way out.    Moreover, the investment itself was structured as an equity investment rather than debt and, accordingly, the investor did not have any security over the property to be developed.

We have yet to determine if our doctor client will lose his investment, but this case highlights the importance of getting good legal advice and legal representation before investing.

 

 

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