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Six Cannabis Regulatory Considerations Regarding State Receiverships

By Charles Alovisetti

Mar 19, 2021

The following excerpt is from an article published this month by Marijuana Venture.

The fact that cannabis companies cannot access federal bankruptcy courts is old news. Even ancillary companies with indirect involvement in the federally illegal cannabis industry have been denied access to federal bankruptcy. And while there are signs that reform is coming, accessibility to bankruptcy courts will not become available until federal law changes. Until then, cannabis companies and investors must use state receiverships or out-of-court workouts to restructure an insolvent business.

Outlined below are six regulatory considerations cannabis investors and operators should keep in mind when thinking about court-supervised transfers of control of a cannabis business. These considerations are important in several business situations, such as when facing a potential state receivership action or when any kind of transaction is contemplated (such as a loan which could end in receivership). They also apply in personal situations, like a divorce or the settling of an estate upon death.

To illustrate how these considerations might impact cannabis businesses, this article examines the new Massachusetts regulations that address court appointees and the management of cannabis licenses.

1. Is there a unique process for transferring control of licenses in state receivership?

The initial issue is whether a state has any unique process for transferring licenses via state receiverships or through another court-appointed entity or individual. If this is not the case, typical changes-of-control processes will need to be followed. These can be both time-consuming and impractical in an insolvency scenario, leading to the destruction of all remaining value in a troubled business.

As of January 8, 2021, the Cannabis Control Commission (CCC) of Massachusetts now has regulations that address putting receivers in charge of cannabis licenses. It is covered through a new defined term called “court appointee,” which picks up instances where a person or entity may be appointed by a court to oversee a licensed business (such as receivers, trustees, administrators of estates, guardians, etc.).

Continue reading the article here.


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