ARTICLE
5 November 2019

Cannabis And Co-Operatives – A Traditional Business Model In A New Agricultural Sector

MT
Miller Thomson LLP

Contributor

Miller Thomson LLP (“Miller Thomson”) is a national business law firm with approximately 525 lawyers working from 10 offices across Canada. The firm offers a complete range of business law and advocacy services. Miller Thomson works regularly with in-house legal departments and external counsel worldwide to facilitate cross-border and multinational transactions and business needs. Miller Thomson offices are located in Vancouver, Calgary, Edmonton, Regina, Saskatoon, London, Waterloo Region, Toronto, Vaughan and Montréal.
Co-operatives are an important part of Canada's agricultural sector and they offer a useful business structure for small and medium-sized growers in the developing cannabis industry
Canada Food, Drugs, Healthcare, Life Sciences

Co-operatives are an important part of Canada's agricultural sector and they offer a useful business structure for small and medium-sized growers in the developing cannabis industry.  Producer members of a co-operative can pool resources and share profits through their ownership of a business that serves their needs.

Co-operatives as a business structure

A co-operative is a corporation, just like a company.  That means its shareholders have protection from personal liability and a stable legal structure through which a group of people can carry on business. A co-operative is different from a company, though, because it is democratic – each member has one vote no matter how many shares they own.  In a co-operative, there is no such thing as a majority shareholder who can control how the business operates.  A co-operative also distributes profits to its members based upon the amount of business they do with the co-operative, because that business is what makes the co-operative profitable.

Co-operatives and agriculture

Co-operatives have been used by many Canadian farmers as a way for them to sell their products, rather than each farm dealing with marketing and distribution.  Individual farms remain independent while selling their products to a large market under a common brand.

Canada's agriculture co-operatives provide a range of benefits to their members, including:

  • processing and marketing;
  • provision of supplies such as fertilizer and seeds; and
  • access to shared farm equipment.

Co-operatives and cannabis producers

In Canada, many cannabis growers are small or medium sized businesses.  They have expertise and high quality products, but lack the financial resources of the large scale producers.

Like other farmers, cannabis growers can join forces in a co-operative to effectively process, promote and sell their products.  The co-operative structure allows smaller cannabis producers to compete with bigger growers and processors, enjoying the benefits of working through a larger entity while keeping their independence.  A co-operative can help its members with supplies, equipment, testing, packaging, marketing and more.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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