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Bankruptcy court protection not afforded to US-based cannabis/cannabinoid companies

Bankruptcy court is inaccessible to companies in the cannabis/cannabinoid industry in the United States. This means struggling US-based cannabis companies are forced to look for other forms of relief, primarily assignments for the benefit of creditors under state law and state law receiverships, or seek bankruptcy relieve outside the United States. There may be creative ways to access Canadian court protection.

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Mark A. Salzberg, of Squire Patton Boggs LLP., believes that while bankruptcy may be unavailable to domestic cannabis companies, the availability of bankruptcy relief for cross-border insolvencies has not, to date, been tested. For instance, the legal cannabis industry in Canada under stress for many reasons, including a black market for cheaper cannabis. Many Canadian cannabis companies also have operations and assets in the U.S. Typically, a distressed Canadian company with U.S. assets would begin an insolvency proceeding in Canada and then file a petition under Chapter 15 of the Bankruptcy Code in an American bankruptcy court, seeking recognition of the Canadian proceeding to administer its operations and assets in the U.S.

However, any Chapter 15 filing by a Canadian…

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