British Columbia-based cannabis producer Evergreen Medicinal Supply Inc.’s licence to grow and sell marijuana was suspended by federal regulators, the latest compliance shortfall to hit Canada’s legal pot market.

Health Canada spokesperson Tammy Jarbeau confirmed to BNN Bloomberg in an email that the government agency suspended Evergreen’s ability to “cultivate, process and sell dried and fresh cannabis, cannabis plants and cannabis seeds” in August following an unannounced inspection that led to a non-compliance order on the company.

“On Aug. 9, Health Canada suspended Evergreen Medicinal Supply’s licences to protect public health and safety, including preventing cannabis from being diverted to the illegal market, as a result of non-compliance with certain provisions of the Cannabis Act and Cannabis Regulations,” Jarbeau said.

Evergreen Medicinal’s suspension is the second time that Health Canada has enforced such an action on a licensed cannabis producer. Earlier this year, Health Canada suspended the sales licence of Winnipeg-based cannabis producer Bonify Holdings Corp. after the company was found to be selling marijuana it obtained from illicit sources.

It also comes as investors await Health Canada’s ruling on what penalty it will enforce on CannTrust Holdings Inc., after the regulator found thousands of kilograms of cannabis being grown in unlicensed rooms. Possible penalties for CannTrust range from a $1-million fine, to a suspension or revocation of the company’s ability to produce and sell legal cannabis in Canada.

Jarbeau said Evergreen provided Health Canada with a response to its licence suspension on Sept. 9 and “is working on corrective actions” that will be reviewed by regulators.

Health Canada inspectors conducted an unannounced inspection at the company’s facility in Saanichton, B.C. in April, Jarbeau said. The inspection uncovered “a number of critical observations and an overall non-compliant rating” related to the company’s production practices, record-keeping, inventory control, and adherence to licence controls, Jarbeau added.

How CannTrust can get back into Health Canada's good books George Robinson knows a thing or two about cannabis compliance. He has acted as a consultant for a number of Canadian producers and was brought on at Bonify to right that company after it ran afoul of regulators. Today on Commodities, he comments on steps CannTrust must take to get back into Health Canada’s good book.

Evergreen received its licence to sell medical cannabis in March 2017 and operated mainly to produce legal pot for other accredited licence producers. According to a 2017 press release from the company, Evergreen operates a 5,700-square-foot facility in Saanichton -- about 20 kilometres north of Victoria -- and had zoned approvals to upgrade its production space to an additional 150,000-square-foot area.

British Columbia court documents also show Evergreen was recently sued for unpaid rent and an expired lease. Philip Illingworth, who owns the land that Evergreen operated on, said the company owes him $425,061 in rent and continued to do business despite its lease expiring at the end of last year. Justice B.D. MacKenzie ruled in July in favour of Illingworth and ordered Evergreen to vacate its facility by the end of August, according to CanLII court documents.

Shawn Galbraith, Evergreen’s founder and chief executive officer, didn’t immediately respond to multiple requests for comment from BNN Bloomberg.

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