Cannabis-adjacent Bankruptcy Eligibility Update: Significant New Decision

Around the time Reuters published our article regarding bankruptcy eligibility, the U.S. Bankruptcy Court for the Central District of California (LA Division) issued a decision in In re The Hacienda Company, LLC, that thoughtfully articulates the balancing of governmental policies, bankruptcy purposes and creditors' rights a bankruptcy court should engage in when dealing with cannabis and cannabis-adjacent debtors. As an update to our article, below describes how the Hacienda decision advances the analysis performed by prior courts.

Facts:

The debtor was in the cannabis wholesale manufacturing and packaging business until February 2021. After the debtor ceased operations, it transferred its value through a sale of intellectual property to a publicly traded Canadian company whose sole business is cannabis growth and sales, receiving approximately 9.4% of stock as consideration.