Shook Partner Stephanie McGraw and Associate Sonila Themeli have authored “Cashed Out – Bankruptcy and Alternatives for Distressed Companies in the Cannabis Industry” for the Cannabis Law Journal. McGraw and Themeli explain that the federal status of cannabis as a Schedule 1 drug precludes cannabis companies from seeking bankruptcy protection—with bankruptcy courts also excluding companies that provide ancillary services to cannabis companies, such as landlords, from protection as well.
The article explains other options that may benefit distressed companies, such as receiverships or assignments for the benefit of creditors (ABCs). “The robust bankruptcy protections available to other industries are largely unavailable to companies with ties to the marijuana industry,” McGraw and Themeli conclude. “State-based alternatives like ABCs and receiverships may offer some limited relief. Until Congress acts to deschedule marijuana, distressed cannabis companies will continue to face uncertainty in nearly every aspect of their business, including end stages.”