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