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Kevin McLaughlin and Maxwell Heller Contribute to Cannabis Business Times: Will Bankruptcy Relief Reach Struggling Cannabis Business?

Centri’s Kevin Mclaughlin, Partner & Cannabis Practice Leader, and Maxwell Heller, Managing Director & M&A Practice Leader, contributed to a Cannabis Business Times article: Will Bankruptcy Relief Reach Struggling Cannabis Business?

The article discusses the complex landscape of bankruptcy relief for cannabis businesses in the United States. Due to the conflicting legal status of cannabis at the federal and state levels, operators in the cannabis industry face unique challenges. While bankruptcy provides a legal framework for businesses to restructure or liquidate their assets during financial distress, cannabis businesses encounter significant obstacles in pursuing bankruptcy relief.

The key points in the article include:

1. Legal Hurdles: Cannabis businesses must comply with the Bankruptcy Code and other federal laws to be eligible for relief. However, because cannabis remains illegal at the federal level, plant-touching businesses and service providers working with cannabis companies often struggle to file for bankruptcy.
2. Strict Interpretation: A 2019 case involving Colorado-based Way to Grow Inc. highlighted how strict bankruptcy law interpretation can be when applied to cannabis. Way to Grow, a hydroponic supply company serving both traditional agriculture and cannabis cultivation, was deemed ineligible for bankruptcy relief due to its association with an illicit substance.
3. Alternative Paths: While bankruptcy is well-known, there are alternative options. Receivership, where a court appoints an impartial third party to manage a company’s assets, can protect creditors and stakeholders during financial distress.
4. Future Prospects: Recent court cases and the potential rescheduling of cannabis may signal a future option for bankruptcy relief in the industry. However, significant hurdles remain, and cannabis businesses are advised to proceed cautiously until legal clarity improves.

Bankruptcy relief for struggling cannabis businesses remains complicated, but 2024 and 2025 should provide additional clarity on the future of bankruptcy relief for cannabis operators.

How Centri Can Help

At Centri, we blend our extensive knowledge of the cannabis industry with our experience in other highly regulated sectors. Our cannabis business advisory services are tailored to satisfy your needs and engineered to evolve as the demands of your company grow and change. No matter your position in the emerging cannabis market, we can support and guide you through any regulatory reporting or financial obstacles.

Kevin McLaughlin

Partner | Cannabis Practice Leader | CPA

Kevin is a Partner at Centri Business Consulting and the leader of the firm’s Cannabis Practice. He has more than 10 years of public accounting and consulting experience. View Kevin McLaughlin's Full Bio

Maxwell B. Heller

Managing Director | M&A Advisory Practice Leader

Max is a Managing Director at Centri Business Consulting and the leader of the firm’s M&A Advisory Practice. He has more than 20 years of merger and acquisition consulting experience and provides M&A advisory services to private equity firms, venture capital firms, family offices, and strategic/corporate clients. View Maxwell B. Heller's Full Bio