In 2016, Pennsylvania joined what is now 37 states and the District of Columbia in legalizing medical cannabis. The Commonwealth’s cannabusinesses share in a struggle that is common in other legal jurisdictions: operating within the confines of the Controlled Substances Act and the Bankruptcy Code. Insolvent individuals and businesses that profit from cannabis or hold cannabis assets cannot declare bankruptcy because cannabis is a Schedule I drug. Under state law, other insolvency alternatives like an assignment for the benefit of creditors, receiverships, and compositions with creditors exist as potential alternatives.

Pennsylvania’s insolvent cannabusinesses are in a uniquely poor position because of the state’s prohibition on the transferability of cannabis permits to third parties. These permits are an incredibly valuable asset for these businesses. To fix this issue, Pennsylvania can look to both its own Liquor Code or New Jersey’s cannabis permitting transfer scheme. Yes, even New Jersey gets some things right. As a result, if Pennsylvania adopted a cannabis permit transferability provision in its medical cannabis law, insolvent cannabusiness could likely resolve their financial issues through an assignment for the benefit of creditors.



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