With Cannabis Set to be a $75 Billion Business by 2030, Receivers Need Regulatory Clarity
The cannabis industry is fraught with uncertainties, contradictions and way too much cash. So when a pot shop goes under, the normal remedies and protection provided by the bankruptcy court are typically not applicable.
“Companies or individuals that directly derive their income from the manufacturing, distributing, dispensing or possessing of marijuana are ineligible for bankruptcy relief,” states a recent story on the Commercial Bankruptcy Advisor blog entitled “Bankruptcy Courts Just Say No to the Marijuana Industry.”
Further, there are no uniform standards for the appointment of a Receiver among state and federal courts due to varying jurisdictional laws and the lack of history within this new industry.
So how does a Receiver like Douglas Wilson Companies handle the liquidation or restructuring of a failed business considered a criminal offense under federal law?
With so much uncertainty it is important to appoint a Receiver whohas significant experience being a fiduciary in any context. Having a strong, problem-solving and business oriented team is vital to a cannabis operation in receivership.
Receivers face a host of challenges from their own legal jeopardy, managing taxes, dispensary leases and mortgages, payroll, operations, security, accounting and: what to do with all that cash!?
TO ADD SOME CONTEXT: BANKS WON’T TOUCH THE CANNABIS BUSINESS.
As a Receiver, in an all-cash business, it’s critical to have an onsite employee at all times to avoid skimming off the top. And you need to sweep the cash regularly. Using sound cash management protocols and best in class transport and storage is a must in this business.
So with all that cash and potential legal jeopardy for Receivers, regulatory reform will certainly follow.
”Taking over a business that was run unprofessionally, creating accounting records, managing landlords and leases, overseeing payroll and taxes, and coming up with proper protocols and standards is a must,” says Douglas Wilson. “Meanwhile, the industry is still in the weedsfiguring all this out.”