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Kevin McLaughlin Featured in MJBizDaily Article

MJBizDaily recently interviewed Centri’s Kevin McLaughin, Partner & Cannabis Practice Leader, about the state of cannabis bankruptcy reform for the article: Marijuana Bankruptcy Reform Could Be Inching Closer for US Operators.

The article was spurred by a webinar series, Mainstreaming Cannabis, which Centri participates in with the law firm Duane Morris. The series discusses unique challenges cannabis companies face due to the conflicting legal status of cannabis at the federal and state levels. 

As the article details, while there has been widespread anticipation regarding the Drug Enforcement Administration’s (DEA) proposal to reclassify cannabis into a less hazardous category (from Schedule I to Schedule III) and recognize its medical potential under the Controlled Substances Act (CSA), the ultimate outcome remains uncertain.  There are many obstacles and possible roadblocks that could impact finalization of the ruling.

McLaughin discussed that moving marijuana to Schedule III positively impacts business restructurings, as it would eliminate 280E taxation. The change makes cannabis assets more attractive and valuable and opens new options for insolvent cannabis companies. Currently, many companies find themselves in the position of needing to liquidate and go out of business, though receiverships and out-of-court restructuring are other options.

There are additional signs that reform might be on the horizon. Recent court decisions offer hope for change. In a 2023 case, the U.S. Bankruptcy Court for the Central District of California allowed the distribution of cannabis-related assets for the benefit of creditors and debtors, looking past marijuana’s federal illegality. Decisions like this open the door for more creativity in marijuana bankruptcy cases.  When rescheduling is finalized, more courts may favor cannabis-related companies in bankruptcy proceedings.

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.