Is Chapter 15 Available To A Cannabis MSO? In The Face Of Uncertainty, Tread Lightly – Cannabis & Hemp – Worldwide – Mondaq News Alerts

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“Cannabis enterprises have been forced to consider their options when faced with insolvency. Especially in the U.S., these options are limited by the inability of cannabis enterprises to obtain relief under the United States Bankruptcy Code.”

On 31 March 2021, the State of New York legalized the use, possession, and growth of cannabis by adults. Within the United States, cannabis is now legal in 16 states including Washington D.C., with legalization taking effect in two more states, Virginia and New Mexico, later this year. This state-level trend toward legalization in the United States continues even though cannabis remains illegal at the federal level.1 However, in Canada, cannabis has been legal at both the federal and provincial levels since 2018.

The opening of these markets has generated significant investment on both sides of the U.S.-Canadian border. In January 2021 alone, North American cannabis companies reported more than $1.6 billion in capital raises.2 Despite this activity, numerous cannabis enterprises continue to fail or are currently experiencing financial distress. In many cases, this distress has resulted from oversaturation and a glut of market participants (legitimate and not) or an inability to keep up with (or a mistiming of) an ever-changing regulatory environment in both Canada and the United States. It may also be a sign that the legal cannabis retail market has reached a peak, as reports show potentially sustained declines in month-over-month retail sales of cannabis products.3

Against this backdrop, cannabis enterprises have been forced to consider their options when faced with insolvency. Especially in the U.S., these options are limited by the inability of cannabis enterprises to obtain relief under the United States Bankruptcy Code.4 For multi-state operators doing business in the U.S. and Canada

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