Floating with cannabis: Update for medicinal cannabis companies looking to be listed in the UK
Floating with cannabis: Update for medicinal cannabis companies looking to be listed in the UK
The legal cannabis market is of increasing interest to entrepreneurs and investors. In recent years, we have seen a trend of growing deregulation in the supply and use of cannabis and cannabinoids globally, and a corresponding change in societal attitudes. The position in the UK echoes the position globally, with the appetite for investing in the legal cannabis sector increasing rapidly. However, investing in the cannabis sector remains a potential legal minefield, especially since the domestic regulatory regime is complex and investors and businesses will also need to be mindful of the extra-territorial reach of the Proceeds of Crime Act (POCA).
On 18 September 2020, the Financial Conduct Authority (FCA) clarified its position and set out the general approach it would be taking as regards cannabis companies seeking admission to the Official List. It is anticipated that more formal guidance will follow in due course following a wider consultation.
UK-based medicinal cannabis companies
The FCA approach suggests that the position is clear for UK-based medicinal cannabis and cannabis oil companies. A medical cannabis company can be listed on Official List if it has the appropriate Home Office licences for their cannabis-related activities.
Overseas medicinal cannabis companies
The UK regulator’s position is more nuanced in connection with overseas-licensed cannabis companies. The overseas companies may be admitted to the Official List if they fulfil the listing criteria and the FCA is satisfied that their overseas activities would be legal if carried out in the UK. Accordingly, the FCA will undertake a review of the medicinal cannabis companies’ overseas activities to assess the risk of non-compliance with the UK legal regime. The FCA stated that it will consider the legal basis of the overseas companies’ operations, such as the local licensing regime and the licences held by the companies. Nevertheless, it also noted that the licensing regimes differ globally, and it should not be assumed that a company licensed overseas would be granted a licence in the UK. Therefore, the overseas medicinal cannabis companies will likely face greater scrutiny than UK-based medicinal cannabis businesses.
Recreational cannabis companies
As recreational use of cannabis remains illegal in the UK, the FCA has outlined that it will not permit overseas companies whose business is recreational cannabis to be admitted to the Official List, even if such use is permitted in the overseas territories it is operating in and/or they are in possession of a licence issued by an overseas medicines or pharmaceuticals licensing authority. At the fore of the FCA’s thinking is the question of whether proceeds of such business would constitute “criminal property” under POCA.
The FCA’s guidance thus provides some much-needed clarity for cannabis companies considering listing in the UK. However, this is likely to be only the start, with further guidance and regulation in respect of the sector sure to follow.
At Wallace, we have a dedicated team to advise on matters connected to the provision of medical cannabis and wider cannabis-related business. We have experience working with market operators, including growers, suppliers, and exporters, as well as with investors both domestic and international.
We can advise on licencing and regulatory matters, preparation of a company for its first public offering in the UK, corporate investments, corporate transactions, setting up of new businesses and other commercial transactions.
Our cross-disciplinary team includes:
Regulatory matters: Partner, Oli Goldman and Senior Associate, Josephine Mathew
Corporate advice: Partners, Rex Newman and John Woodhouse
Commercial agreements: Frank Jennings
We would be pleased to assist clients with any questions.