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Federal Government Says Marijuana Companies Cannot Use Bankruptcy Laws

The federal government's classification of marijuana as a Schedule I narcotic means the cannabis industry is prevented from working with many important institutions, primarily banks. But it turns out there's another important aspect of the economy marijuana companies cannot use: bankruptcy.

Two members of the Justice Department's Executive Office for U.S. Trustees wrote in an article last week that marijuana companies cannot use bankruptcy systems to liquidate assets or restructure their businesses. They noted that since the Supreme Court has ruled that federal laws outlawing marijuana supersede laws in the states, that federal programs cannot be used to help cannabis companies, including bankruptcy systems.

"The USTP’s response to marijuana-related bankruptcy filings is guided by two straightforward and uncontroversial principles," the two officials wrote. "First, the bankruptcy system may not be used as an instrument in the ongoing commission of a crime and reorganization plans that permit or require continued illegal activity may not be confirmed. Second, bankruptcy trustees and other estate fiduciaries should not be required to administer assets if doing so would cause them to violate federal criminal law."

The two officials went on to say that anyone involved in the bankruptcy of a cannabis company would be breaking the law, including a "trustee who liquidated the fertilizer or equipment used to grow marijuana, who collected rent from a marijuana business tenant, or who sought to collect the profits of a marijuana investment."

Last April, the Justice Department actually stated in a memo that bankruptcy proceedings involving marijuana assets needed to be reported. This article was a follow-up to that memo, because the DOJ says they've seen an increasing number of bankruptcy proceedings involving cannabis assets in some form.

So if you were wondering if the federal government is relaxing its stance on marijuana, the answer is clearly no.

(h/t Forbes)


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