Overview<\/p>\n
\nCanada and the US share a long history of cooperation when it comes to cross-border\u00a0restructuring. For decades, the legislation of both countries has provided a framework\u00a0for recognition and the courts in each jurisdiction have shown great deference and\u00a0reciprocity in facilitating cross-border filings. The reciprocity shown has been at times\u00a0nuanced, where the local laws of the secondary jurisdiction are more restrictive than in\u00a0the primary jurisdiction.\u00a0<\/p>\n
As discussed in greater detail below, a key example of these\u00a0limitations has been in the case of the cannabis industry\u00a0where, since 2018, the sale and distribution of cannabis is\u00a0legal in Canada, but in the US, has not been legalized at\u00a0the federal level. However, the recent filings of Cannabist\u00a0Company Holdings Inc. (\u201cCannabist\u201d) show that there may be\u00a0a path forward yet for future cross-border cannabis filings in\u00a0both Canada and the US.\u00a0<\/p>\n
Cannabis restructuring in Canada<\/p>\n
In 2018, the Government of Canada enacted the Cannabis Act,\u00a0thereby legalizing and establishing the regulatory framework\u00a0for the production, distribution, sale and possession of\u00a0cannabis (and related services) in Canada. In addition to the Cannabis Act, several provinces have enacted provincial\u00a0legislation that also regulates cannabis operations in\u00a0their provinces.\u00a0<\/p>\n
After an initial and short-lived boom, by 2019, the cannabis\u00a0market began to show severe signs of distress and in the\u00a0past six years, cannabis restructurings under the Companies\u2019\u00a0Creditors Arrangement Act (CCAA) in Canada have become\u00a0commonplace within Canadian restructuring and have not\u00a0been limited to companies with operations in Canada. Indeed,\u00a0given the restrictions in the US (discussed below), many\u00a0operators who operate legally at the state level structure with\u00a0Canadian parents to access the Canadian public markets.\u00a0However, until recently, where Canadian parent companies\u00a0have filed for CCAA protection in Canada, state-level solutions\u00a0for operations have been limited.<\/p>\n
Canada\u00a0Cannabis restructuring in the US<\/p>\n
Cannabis companies in the United States have not\u00a0historically been able to avail themselves of restructuring\u00a0under the Bankruptcy Code\u2014until now. For years, most\u00a0distressed cannabis operators have been forced to rely\u00a0on state-law alternatives to formal restructurings, out-of court restructurings, and piecemeal asset sales, rather than\u00a0centralized restructuring proceedings.<\/p>\n
Recently, some US courts have permitted cannabis-adjacent\u00a0entities to remain in US bankruptcy proceedings where\u00a0the business is adequately removed from federally illegal\u00a0activity.1<\/a> In a landmark ruling on May\u00a09, 2026, Judge Brendan\u00a0L. Shannon of the US Bankruptcy Court for the District of\u00a0Delaware granted recognition of the Cannabist Canadian\u00a0restructuring proceedings, validating the thesis that Chapter 15 constitutes a viable path for domesticating the\u00a0foreign restructurings of foreign cannabis companies with US operations.2<\/a><\/p>\n Cannabist overview<\/p>\n On March\u00a025, 2026, Cannabist filed for CCAA protection in\u00a0Canada with a view toward seeking recognition of the CCAA\u00a0proceedings pursuant to Chapter 15.3<\/a> Until now, the US bar\u00a0to Chapter 11 filings had dissuaded financially distressed\u00a0cannabis entities from pursuing Chapter 15 cases.<\/p>\n The Cannabist US and Canadian filings helped to facilitate the\u00a0implementation of a sales process, including the purchase of\u00a0Cannabist\u2019s Ohio and Delaware operations. The Chapter 15\u00a0filing also sought to leverage the automatic stay to prevent the\u00a0IRS from asserting a federal tax lien.4<\/a><\/p>\n The Cannabist debtors were limited to Canadian\u00a0parent holding companies and the cannabis cultivation,\u00a0manufacturing and retail operations were conducted through\u00a0separate non-debtor subsidiaries. By structuring the filing\u00a0in this way, the Chapter 15 petitions avoided requiring the\u00a0Bankruptcy Court to directly administer an ongoing cannabis\u00a0business or exercise jurisdiction over assets and operations\u00a0that remain prohibited under federal law.<\/p>\n As for the operating subsidiaries, the automatic stay only\u00a0applied to the debtor and did not apply to non-debtor affiliates\u00a0or guarantors\u2014meaning the US operating companies did not\u00a0benefit directly from the Chapter 15 stay and remained outside\u00a0the formal scope of the insolvency proceedings.5<\/a><\/p>\n Key takeaways from the ruling<\/p>\n In its\u00a0May 9, 2026 ruling, the US Bankruptcy Court for the\u00a0District of Delaware granted recognition under Chapter 15 of\u00a0the Bankruptcy Code to the Cannabist Canadian restructuring\u00a0proceeding. The court\u2019s findings and order confirmed that all\u00a0applicable statutory prerequisites had been met:<\/p>\n The Debtors have property in the United States and are\u00a0eligible to be debtors in a Chapter 15 case pursuant to\u00a0Sections 109 and 1501 of the Bankruptcy Code.6 Among the significant protections extended by the\u00a0recognition order:<\/p>\n The automatic stay set forth in Section 362 of the\u00a0Bankruptcy Code applies with respect to the Debtors\u00a0and the Debtors\u2019 property that is within the territorial\u00a0jurisdiction of the United States.9<\/a> Conclusion<\/p>\n Given that US recognition of cannabis restructurings has thus\u00a0far been limited to Canadian holding companies, it remains\u00a0to be seen in which instances\u2014and to what extent\u2014US\u00a0Bankruptcy Courts will extend recognition to Canadian cannabis\u00a0restructurings more broadly.<\/p>\n Nonetheless, the recognition of Cannabist’s CCAA proceeding\u00a0under Chapter 15 by the US Bankruptcy Court for the District\u00a0of Delaware represents a meaningful development in cannabis\u00a0restructuring law, demonstrating a creative cross-border\u00a0structure that pairs Canadian CCAA eligibility with Chapter 15\u00a0recognition in the United States.<\/p>\n","protected":false},"excerpt":{"rendered":"Overview Canada and the US share a long history of cooperation when it comes to cross-border\u00a0restructuring. For decades,…\n","protected":false},"author":2,"featured_media":864920,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[49,48,44],"class_list":["post-864919","post","type-post","status-publish","format-standard","has-post-thumbnail","category-canada","tag-ca","tag-canada","tag-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/864919","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=864919"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/864919\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/864920"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=864919"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=864919"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=864919"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n The case was properly commenced pursuant to Sections\u00a01504, 1509, and 1515 of the Bankruptcy Code.7
\n The Canadian Proceeding is granted recognition as a\u00a0foreign main proceeding as defined in Section 101(23) of\u00a0the Bankruptcy Code pursuant to Section 1517(a) of the\u00a0Bankruptcy Code.8<\/a><\/p>\n
\n All persons and entities are enjoined from seizing,\u00a0attaching, and enforcing or executing liens or judgments\u00a0against the Stay Parties\u2019 (as defined in the Recognition\u00a0Order) property in the United States or from transferring,\u00a0encumbering, or otherwise disposing of or interfering with\u00a0the Stay Parties\u2019 assets or agreements in the United States\u00a0without the express consent of the Foreign Representative,\u00a0and are enjoined from commencing or continuing any\u00a0judicial, administrative, or other action or proceeding\u00a0involving or against the Stay Parties or their assets in the\u00a0United States.10<\/a>
\n All counterparties to a lease of premises or other executory\u00a0contract that the Debtors or their direct and indirect\u00a0subsidiaries are party to or guarantor of, in respect of\u00a0property located within the United States, are prohibited\u00a0from taking any steps to cancel, terminate, or modify\u00a0such leases or executory contracts for any reason,\u00a0including non-payment of rent and\/or due to any provision\u00a0conditioned upon commencement of the Canadian\u00a0proceeding or a case under the Bankruptcy Code or the\u00a0insolvency or financial condition of the Debtors or any of\u00a0their affiliates.11<\/a>
\n The administration, realization, and distribution of\u00a0all or part of the Debtors\u2019 assets within the territorial\u00a0jurisdiction of the United States is entrusted to the Foreign\u00a0Representative, who is established as the exclusive\u00a0representative of the Debtors in the United States.12<\/a><\/p>\n