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Court-appointed receivers an option for troubled marijuana companies

Posted on Posted in Marijuana Business News

Say your cannabis company is in trouble because you chose the wrong business partner. You want to force that partner out. So you find a lawyer, file suit, have all your ducks in a row, and things are looking good.

Then you hit a snag: Who will run the day-to-day business operations while you and your partner duke it out in court over who gets what in terms of company assets?

The answer for at least four marijuana-related companies has been a court-appointed receiver. And it’s an option others in the industry may want to consider should they find themselves in a similar situation.

Court-appointed receivers essentially take over a business when it’s involved in legal action. Receivers manage everything from accounting to sales to even dealing with separate lawsuits against the company they’re running.

“We’re a neutral third party. So we don’t have a dog in anybody’s fight. Our purpose is to protect and preserve the asset as it’s going through the legal process,” said Scott Yahraus, a senior project manager at Receivership Specialists, which has offices in Arizona, California, Colorado and Nevada.

Since 2015, his firm has been appointed to temporarily manage the day-to-day operations of four marijuana-related companies in Arizona, including three dispensaries, as those businesses were embroiled in litigation.

Receivership is a niche business, and most companies in the cannabis trade likely won’t need one. It’s really a last resort for when things have fallen apart. Still, marijuana industry observers say, it’s a good backup.

“An interested party has to come in and ask for a receiver to be appointed,” explained Dan Garfield, a Denver-based marijuana industry attorney. “That could be an owner, it could be a creditor, it could be the attorney general if there’s a concern the company is breaking the law. But typically it’s a person who has a monetary interest in the company.”

However, Garfield said, there are definite upsides to having a receiver if a company is in crisis.

“During an ownership dispute, there’s always a concern that the business is not going to be run properly,” Garfield said. “They could be stealing, they could just be doing a crappy job. So if you put a receiver in, that business will be safeguarded for a period of time and it’ll keep operating. That’s to everyone’s benefit.”

A receiver can also be beneficial to embattled cannabis businesses because many can’t obtain bankruptcy protection, Garfield said.

“So if there’s a distressed marijuana company, and there’s a lender that’s afraid they’re not going to get paid, well, they can’t go into bankruptcy court,” Garfield said. “But they can go into state court and ask for a receiver to be appointed to keep the business running … and hopefully get paid. That gives a little more comfort to lenders.” Read Entire Article at Marijuana Business Daily

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