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CannTrust lays off 20% of workforce to address regulatory compliance issues

CannTrust Holdings Inc. has reduced its workforce by 20%, or 180 people, with most of the affected employees in cultivation and customer service support roles.

The Vaughan, Ontario-based cannabis producer expects this downsizing to lead to annual cash savings of about C$9 million. However, the company will pay C$2 million in severance costs.

CannTrust said the action is part of efforts to bring its operations and procedures into full regulatory compliance.

On July 8, a Health Canada audit found that the company was growing cannabis in five unlicensed rooms in its Pelham, Ontario-based greenhouse facility.

"Over the past two months, we have moved swiftly to assess and address the Health Canada report indicating areas of non-compliance in our operations, as well as the findings of the Special Committee's independent investigation," CannTrust's interim CEO Robert Marcovitch said in a Sept. 5 press release.

To address Health Canada's concerns, the company appointed a special board committee. It will investigate the causes and extent of the noncompliance, provide oversight and direction to CannTrust's remediation efforts to achieve full compliance with Health Canada's regulations, and review its strategy and business plan.

CannTrust has retained independent advisers to investigate and remediate the company's noncompliance under the special committee's supervision.

Previously, the CannTrust board terminated CEO Peter Aceto after an investigation into the illegal cultivation of cannabis that flouted Health Canada regulations. It has also demanded the resignation of Chairman Eric Paul.

The company has placed a voluntary hold on the sale and shipment of all cannabis products.