Would You Sit on the Board of a Cannabis Corporation?

The federal legislation, specifically the Cannabis Act, is set to go into effect on October 17, 2018. There is a lot of activity around the creation of businesses who will be selling cannabis, cannabis accessories and related services. How is this a governance issue you ask? Well as I say over and over again everything is about governance.

The specific governance issue about the Cannabis Act is that directors will not be allowed to use the due diligence defense to avoid paying an administrative penalty.  This means that if the business fails to follow any provision of the Cannabis Act, the board members will not be able to say that they asked the questions of management and relied on the responses. Due diligence is a common defense for board members and I teach board members to apply the principles of due diligence to stay out of trouble. The Cannabis Act prohibiting the use of this defense is an interesting development in increasing director’s personal liability. I would encourage any board member to seek professional advice before agreeing to serve on the board of a cannabis corporation.

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