In a recent Law360 article, Thompson Coburn attorneys Michael Rosenblum, Jake Schwartz, and Aleksandra Abramova explored the potential implications of rescheduling cannabis for bankruptcy eligibility.
Their analysis centered on whether cannabis companies, currently barred from federal bankruptcy protections due to cannabis’s Schedule I classification, might gain access if cannabis is moved to Schedule III. “Rescheduling cannabis from a Schedule I to Schedule III controlled substance gives rise to a significant number of legal questions, including whether cannabis businesses will be permitted to avail themselves of the protections afforded by the federal bankruptcy code,” they wrote.
The article further explores why cannabis companies have been historically prohibited from filing for bankruptcy, certain exceptions to the general rule, and the potential effects of federal deregulation on such companies’ bankruptcy eligibility.
The attorneys further highlighted the significant reliance of these companies on debt financing, a consequence of their limited access to traditional capital. They cited MJBizDaily, stating, “Debt financing has eclipsed equity as the capital-intensive industry’s preferred source of funding, and an estimate of at least $2 billion in debt is coming due in 2026.”
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