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Excluded from Bankruptcy, Cannabis Industry Looks to Receivership

By Neil Sheaffer

Griswold Law: Receivership Services Amidst the Coronavirus Pandemic

At the time of writing this post, the number of Coronavirus (COVID-19) cases in the United States is rising. The World Health Organization (WHO) officially declared a pandemic. The Governor of California issued a “Stay-at-Home” Order to reduce the spread of the coronavirus by limiting non-essential activity. The courts in California are generally closed to the public. Being engulfed in the receivership industry, we have extensive experience with unsafe and unsanitary living conditions. Griswold Law often deals with properties that pose significant health and safety risks to communities across California.  However, the COVID-19 outbreak is the first public health emergency that caused California to quarantine itself. Griswold Law is adapting as quickly as possible to these changing circumstances.

Receivership: The Remedy for Failing Cannabis Businesses in California

Cannabis businesses are not eligible for bankruptcy protection due to the federal prohibition against cannabis. Therefore, the receivership remedy is an effective path to address the struggles of a cannabis business. Seeking and obtaining a court-appointed receiver to take control of and operate a distressed cannabis business can be initiated by a lender affected by a failing business loan or a partner in the cannabis business alleging financial mismanagement.

Receivership Remedy for Illegal Marijuana Dispensaries in California

In California, a Health and Safety Receivership is an effective option to resolve code enforcement issues with residential and commercial properties. Health and Safety Receiverships commonly deal with substandard or abandoned properties when property owners fail to comply with code enforcement or when there is a threat to the health and safety of residents or the surrounding community. While receivership may not initially sound like a resource for illegally-operating marijuana facilities, the illegal sale of marijuana likely constitutes a nuisance pursuant to the California health and safety code and can be a threat to the health and safety of the surrounding community and/or businesses. The Receivership Remedy can resolve complex issues that arise with rogue marijuana dispensaries as dispensaries become more and more common and the industry continues to inflate.

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