MARIJUANA PRODUCERS DEMAND THE RIGHT FOR BANKRUPTCY

The authorities of the United States are providing large-scale financial support to the population and numerous sectors of the economy both. However, some companies, specializing in the cannabis production, cannot file for bankruptcy or receive support - the US Department of Justice is blocking this possibility. And we are now talking about those states where the manufacturers of medical marijuana work legally.

The fact is that marijuana continues to be illegal outside the country. This means that neither the industry workers, nor the companies themselves, nor the points of delivery of medical marijuana can get access to the bankruptcy protection tools. Federal bankruptcy courts will not alleviate the situation of producers by allowing them to restructure their business or get rid of the encumbrances.

An example of the situation was the case of the United Cannabis Corp., which faced a denial of bankruptcy protection.

The reason was that all of the company's operations and revenues were exclusively related to the sale of products, based on the cannabidiol, a drug made from legal industrial hemp. A similar fate, apparently, is expected for its subsidiary, UC Colorado Corp, which is a virtual bankrupt as well. The company itself, as well as its individual creditors, believes that the refusal is illegal, because the company does not conduct the cases, contrary to the legislation of the US. Moreover, the company regularly submits relevant applications to the SEC (Securities and Exchange Commission), which reflects the necessary financial statements.

American experts note that, despite the difficulties with bankruptcy proceedings, marijuana manufacturing companies can use other tools to solve financial problems.

One of them may be a concession in favor of the creditors (called “ABC”). It allows the company to transfer its assets to a third party, which will be directly involved in the resolving of the financial issues. According to the lawyers, such an alternative may prove to be quite viable for those types of businesses that legally exist in a particular state, but at the same time formally violate federal law without having a right for the protection from bankruptcy.

Another alternative to the “classic” bankruptcy in the USA may be the coordinated appointment of a third party as the company's manager, but in this case, the risk that the management might lose the possibility to control the affairs of the company still exists. To overcome it, the lawyers recommend conclude an agreement with a person, related to the possibility of selling the assets or the entire company.

In addition, the experts consider conducting pre-trial negotiations, aimed at the conclusion of an acceptable decision for both parties as the best alternative to bankruptcy. In some cases, it is possible to use mediation.

For now, the US Congress has not passed a law, decriminalizing the production of cannabis all over the country, despite the fact that about 250,000 people in twenty states of the country are employed in its industry.

In the District of Columbia, the authorities even allowed the medical marijuana distribution centers to continue their work during the pandemic.