Cannabis and Co-operatives – A Traditional Business Model in a New Agricultural Sector

October 1, 2019 | Mary Childs

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.

Miller Thomson’s lawyers have worked with many agricultural co-operatives, including cannabis co-operatives.  Our Cannabis Law group has sector-specific knowledge about all aspects of the law relating to cannabis production and distribution.

Disclaimer

The blog sets out a variety of materials relating to the law to be used for educational and non-commercial purposes only; the author(s) of the blog do not intend the blog to be a source of legal advice. Please retain and seek the advice of a lawyer and use your own good judgement before choosing to act on any information included in the blog. If you choose to rely on the materials, you do so entirely at your own risk.