In a recent Law360 article, Thompson Coburn partners Michael Rosenblum and Jake Schwartz examined the evolving question of whether cannabis-related businesses can access bankruptcy protection. While cannabis’s status as a Schedule I controlled substance under the Controlled Substances Act has historically limited bankruptcy relief, recent regulatory developments are prompting renewed analysis. The article explores key bankruptcy principles, recent cases testing the limits of the Bankruptcy Code, the potential impact of marijuana rescheduling, and practical considerations for companies operating in the cannabis industry.
Michael and Jake noted one significant development in April, when federal regulators rescheduled certain FDA-approved marijuana products and qualifying state-licensed medical marijuana products from Schedule I to Schedule III.
“The broader proposal to move marijuana generally from Schedule I to Schedule III remains under review. The DEA administrative hearing on that proposal has concluded, and a recommended decision is pending,” they wrote.
Against this backdrop of regulatory uncertainty, the authors explain that companies involved in commercial cannabis activities should continue to carefully evaluate how their businesses are structured when considering bankruptcy options.
“For practitioners advising distressed cannabis enterprises, corporate structure should remain a key consideration. The holding company, or top-level holding company, approach by which the entities seeking bankruptcy relief do not hold cannabis licenses or directly engage in cannabis operations should continue to be effective in defeating any public policy objection,” they wrote.
Read the full article here.
