No bankruptcies allowed for medical cannabis-related businesses, according to Royal Oak attorney
With 29 states and the District of Columbia running legal medical cannabis programs, there are now thousands of marijuana-related businesses in the U.S.
For most of those in the country’s fastest growing industry, business is great. But, for those cannabis businesses which don’t thrive, bankruptcy will not be an option.
That includes businesses which grow the weed, as well as those which facilitate its growth, processing and sales.
According to the United States Trustee Program, which is a watchdog for U.S. bankruptcy proceedings, this prohibition also extends to real estate leasing and investment.
“It’s pretty safe to say that if your business is operating within the medical cannabis sector, it’s not going to be eligible for bankruptcy protection,” said Tom Howard of Royal Oak law firm Howard & Howard (no relation).
Howard, who is part of the firm’s Cannabis Industry Group, says that marijuana’s continued classification as a Schedule I drug under the federal Controlled Substances Act is the legal reason for the prohibition.
“The bankruptcy system can’t be used as an instrument in the ongoing commission of a crime,” said Howard. “And according to federal law, marijuana is still an illegal substance — even if 29 states don’t exactly agree.”
Howard says the lack of a bankruptcy option could mean cannabis businesses will pay higher interest rates on loans or be required to put up more collateral.
According to Howard, it also means that restructuring debt will be practically impossible and entrepreneurs may have more personal liability to creditors.
Michigan Legislature cuts fines after jobless fraud scandal
LANSING, Mich. (AP) — The Michigan Legislature has unanimously voted to cut high financial penalties for collecting excessive unemployment benefits while easing the ability for employers and claimants to report cases of identity theft.
The legislation was approved Wednesday and will soon reach Gov. Rick Snyder. The bills are a response to thousands of people being wrongly accused of fraudulently receiving benefits.
In many cases between 2013 and 2015, claimants did not commit fraud and were hit with interest along with penalties above the overpayment.
Under the legislation, first-time offenders who receive an overpayment under $500 would have to pay it back instead of being required to refund the overpayment plus a penalty equal to four times the amount that was improperly obtained. Large fines would stay in place for “impostor” claimants.
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