Is your business in the dark? ADVERTISE IN THIS MAGAZINE AND SHINE A LIGHT ON YOUR COMPANY. QR Code: website /ad-space CONTACT US TO LEARN MORE. 801.676.9722 • 855.747.4003 sales@thenewslinkgroup.com reorganization are forced to find state law alternatives, such as receiverships. There has, however, been some expanding openness to providing relief under the bankruptcy code to ancillary businesses in the cannabis industry and to entities that are no longer directly engaged in the industry. In 2023, the United States Bankruptcy Court for the Central District of California held that The Hacienda Company LLC (Hacienda), a “former” cannabis company that terminated its wholesale manufacturing and packaging business prior to filing its Chapter 11 bankruptcy petition, could sell its ownership interests in an acquiring company to pay creditors (See In re The Hacienda Company LLC, Case No. 2:22-bk-15163NB, 674 B.R. 748, 756 (Bankr. C.D. Cal. 2023)). When the U.S. Trustee then filed a second motion to dismiss, this was again denied by the court. “Congress has shown a willingness to avoid punishing a debtor that may have violated law when ‘the real victims would be innocent creditors,’” per the court. Until potentially reversed on appeal, Hacienda may be cited by other bankruptcy courts to permit debtors to use the Bankruptcy Code to liquidate assets of a nonoperating cannabis business. The SAFER Banking Act does not specifically address the bankruptcy code, nor does it change marijuana’s classification under the federal CSA. However, its passage may continue to soften bankruptcy courts’ view on cannabis-related enterprises as legitimate businesses. Only the First Step As both the cannabis industry and the banking and financial services industry closely watch the progress of the SAFER Banking Act in Congress, it’s important to note that this legislation is not comprehensive cannabis reform. It does not make cannabis federally legal, nor does it address taxation issues that have plagued dispensaries and other marijuana businesses. As such, more cautious financial institutions may opt out entirely. Still, institutions deciding against should nevertheless implement rigorous onboarding and ongoing monitoring protocols to avoid inadvertent failure to identify and avoid cannabis-related customers. But should the SAFER Banking Act become law, there will be an increased recognition of the disconnect between federal laws and services that are currently unavailable to legally-operating cannabis businesses. Though the bill still faces significant hurdles in securing enough votes in the Senate, its progress out of committee represents an increased willingness by Congress to consider issues related to state-legal cannabis businesses. In Colorado and other states where cannabis has become a billion-dollar industry, bankers should closely watch the progress of the SAFER Banking Act. Mark Bell is a partner in the Denver office of Stinson LLP. 11 Colorado Banker
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