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The medicinal cannabis industry is thriving across the globe. However, Australia is still seeing some developments around medicinal cannabis and hemp law.
Since it is a relatively new area of trade, it also raises a number of questions from businesses wishing to cultivate or manufacture medicinal cannabis. For example, is medicinal cannabis legal in Australia? Do I need a certain licence?
Medicinal cannabis businesses commonly work with overseas parties and suppliers, and as such, they require the correct documentation and legals in place to ensure they’re doing business correctly.
In this article, we’ll go through what you need to know to start a medicinal cannabis business in Australia.
Is Medicinal Cannabis Legal In Australia?
Medicinal cannabis was legalised in Australia in 2016. That said, it remains a highly regulated industry, and is restricted to medical or research purposes.
Even when being used for medical purposes, it must be distributed under a prescription.
Before we dive into the business aspect of medicinal cannabis, let’s provide some background around the legal aspects of medicinal cannabis.
Hemp And Cannabis Laws In Australia
Hemp and medicinal cannabis laws are quite strict in Australia. They can only be distributed for medical purposes, and even then, states and territories have regulations around its prescription.
The Office of Drug Control (ODC) provides licences and permits for medical cannabis in Australia. So, if you’re a business hoping to engage in the sale or supply of medical cannabis, it’s important that you apply for the correct licences or qualifications to do so.
We’ve also put together this Guide To Hemp Laws if you’d like to learn more about how it may affect your business activities.
Do I Need A Licence For Medicinal Cannabis?
To apply for a licence with the ODC, you must prove that you are a ‘fit and proper person’. So, they’ll most likely look at your criminal history, finances and ability to comply with their requirements.
Licences can be issued to cultivators, manufacturers, importers or exporters of medicinal cannabis in Australia.
For example, cultivators of hemp and medicinal cannabis need to hold a medicinal cannabis licence under the Narcotic Drugs Act 1967. Our lawyers can consult you on your options around a licence for medicinal cannabis under our Medicinal Cannabis Consultation package.
Licences are often required in a range of industries, such as the sale of alcohol. In this case, you’d need to apply for the relevant Liquor Licence.
Register Your Medicinal Cannabis Business
Like any other business, a medicinal cannabis business will need to be registered with the relevant bodies in Australia.
Business registration means you’ll make things official, so you can be taxed accordingly. It also means you’ll have a legitimate business identity, which is good for your brand and customer relationships.
Your identity as a business will be represented by an Australian Business Number (ABN) which you receive from the Australian Business Register.
The registration process will depend on your business structure, though – let’s cover this in more detail.
Which Structure Should I Choose For My Medicinal Cannabis Business?
There are a range of business structures you could choose for your medicinal cannabis business.
You should choose your business structure depending on how much you wish to grow, who you want to hire and the level of risk involved in your business activities.
If you want to keep things small, you may opt for a sole trader or partnership structure. These structures are relatively simple to set up, and don’t cost as much. However, it also means you’ll be personally liable if the business ever runs into trouble.
If you have big plans for your business’ growth or expansion (for instance, if you want to operate overseas in the future), then perhaps a company structure is more suitable for you.
A company structure means you’ll need to invest a little more in the set up and registration process. For example, you’ll need to have a Company Constitution in accordance with the Corporations Act 2001 (more on this later).
Additionally, you’ll receive an Australian Company Number (ACN) on top of your ABN.
Put simply, your business structure should be selected based on what your business hopes to achieve and your financial capacity to do so.
If you’re not sure which structure works best for you, reach out to our team of expert lawyers who can chat you through your options.
What Documents Do I Need For A Medicinal Cannabis Business?
A medicinal cannabis business means you’ll be dealing with a number of suppliers (these include overseas suppliers, which we’ll cover in more detail shortly).
As such, you’ll need to have the details of your arrangements in writing. This is where your contracts and other legal documents come in.
If you’re hiring people to manufacture or cultivate medicinal cannabis for your business, these would be your employees. As such, you’d need to have an Employment Contract with them which sets out their pay, minimum entitlements and other conditions of their employment.
It’s also wise to have a Supply Agreement with your suppliers. This is to clarify key details, such as the resources required, deadlines, quantity of goods and any important details around shipping.
A Supply Agreement is especially important if you’re importing medicinal cannabis from overseas, as there are additional factors to take into account.
We’ve written more about the key legal documents you need for a business in Australia.
Importing Medicinal Cannabis From Overseas?
If you’re working with overseas suppliers, your Supply Agreement might look a little different.
For example, it should have key details around delivery, shipping delays, warranties under the Australian Consumer Law and liability protections.
If your resources are being imported from overseas, it’s also important that you have an Import/Export Agreement. This should cover the following:
- Payment
- Duration of the relationship
- Liability
- Termination
- Delivery details
You’d also need to think about other key matters, like what happens if a supplier can’t perform their obligations. In this case, you may need to rely on any Force Majeure clauses in your agreements.
A force majeure clause means that parties don’t need to fulfil their contractual obligations if some event outside of their control prevents them from doing so.
There’s also the issue of who is liable if a product that is imported is faulty or incorrect. This should be made clear in the Supply Agreement, and should clarify who is responsible under product liability laws.
These are all matters to think about when importing goods into Australia.
Make Sure Your Contracts Are Internationally Enforceable
When dealing with overseas parties, one of the most important things to consider is whether your contracts with them can actually be enforced internationally.
Usually, parties will insert an international arbitration clause which sets out a process for this. However, if a clause like this doesn’t exist in the contract, you’ll need to clarify governing law and jurisdiction.
The governing law is simply the question of, ‘Which country’s laws apply to the contract?’. Jurisdiction, on the other hand, refers to who will actually hear the dispute if someone decides to enforce the agreement.
It’s always safe to consult a contract lawyer if you want to draft an internationally enforceable contract. This way, you can ensure the contract will stand in all the relevant jurisdictions or countries, and you can minimise disruptions to your business activities.
What You Need To Know About White Labelling
It’s quite common for medicinal cannabis businesses to import from other countries (such as Canada). Once it’s in Australia, they’ll then place their own branding on the product.
This is mainly because the medicinal cannabis industry in Australia is still quite young and is yet to see rapid growth. As such, it’s important for businesses in the area to know which agreements and arrangements to sort out, so they’re doing it correctly and legally.
So, an attractive option here is white labelling. This occurs where a business provides goods to another business, and that business sells it under their own branding.
However, like many arrangements, this needs to be in writing. This will be a contract between the selling business and the purchasing business. Primarily, the contract will set out the conditions under which the purchasing business can sell the product under their own brand.
This is known as a White Label Agreement.
For example, a White Label Agreement could cover details around packaging, what happens with defects, IP protection and liability protections.
How Should I Advertise Medicinal Cannabis?
If you’re advertising medicinal cannabis to individuals and small businesses, then your advertising practices will be subject to the Australian Consumer Law. This means the way you advertise your products should not mislead or deceive consumers in any way.
These laws exist to protect consumers from unfair trading practices.
Further, businesses must provide refunds or exchanges where the product is found to be faulty.
It’s important that your business is aware of these advertising laws as there are serious fines and penalties for non-compliance. It’s also a good way to maintain your customers’ trust and confidence in your business.
Key Takeaways
If you’re starting a business in Australia that manufactures, cultivates or imports medicinal cannabis, there are lots of things to consider (both legal and non-legal!).
To get started, it’s wise to consult an expert lawyer who can walk you through your options and ensure you’re remaining compliant with the relevant laws.
Check out our Medicinal Cannabis Lawyers package for a consultation on your business’ legals moving forward.
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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