Here we go again – proposed bankruptcy venue legislation is back after previous “reform” efforts came up empty. For those seeking legislative action, what are the chances for venue reform now?

On 22 October 2020, the UAE government made various changes to the UAE Bankruptcy Law*, including the concept of Emergency Financial Crisis (EFC). Subsequently, on 10 January 2021, the UAE Cabinet declared the existence of an EFC in the UAE. In this article, Partners Michael Morris and Keith Hutchison explore how this declaration may impact on debtors and creditors.

Emergency Financial Crisis

One of the key changes implemented was a power given to the UAE Cabinet to declare an EFC. An EFC is defined as:

In 2020, bankruptcy court doors continued to be shut to cannabis companies. Perhaps most troubling is the continued bar for companies that are only tangentially involved in the state-legalized cannabis industry. Although outlier cases exist, and even though courts have hinted that bankruptcy may be appropriate for some cannabis-related individuals and companies in some situations, there is a consensus now that bankruptcy is generally not available to individuals and companies engaged, directly or indirectly, in the cannabis industry.

The nearly $350 billion loan program made available to small businesses by the Coronavirus Aid, Relief, and Economic Security (CARES) Act was tapped out in less than two weeks. In response to this overwhelming demand, on Friday, April 24, 2020, an additional $320 billion was funded into the loan program, and the second round of applications for small businesses requesting these loans will open on Monday, April 27, 2020.

We are in unprecedented times. The current COVID-19 pandemic will not only have an impact on the physical health of our country, but the economic health of our country as well. Increased bankruptcy filings are a virtually certainty and this raises concerns of many, including licensors and licensees of intellectual property. What should these parties be thinking about given the coming uptick in bankruptcies?

From the Licensee’s Perspective

Recent court service suspensions announced in the UAE – albeit temporary – as part of the government's response to COVID-19 will undoubtedly have an impact on efficacy of debt recovery options available to creditors, at least in the near short term. These measures come at a time when payment default rates are only expected to increase rapidly and creditors will be looking at what actions they can and should take to protect their position, including short and medium term strategies.

Courts struggled last year to find a balance between state-licensed cannabis activity and the federal right to seek bankruptcy protection under the Bankruptcy Code. During 2019, we had the first circuit-level opinion in the bankruptcy/cannabis space that appeared to open the door to bankruptcy courts, albeit slightly. We also had lower court opinions slamming that door shut.

Below, we look at a few of the most important decisions issued throughout 2019 and analyze the current state of the law.

The Ninth Circuit's Garvin Decision

Courts struggled this year to find a balance between state-licensed cannabis activity and the federal right to seek bankruptcy protection under the Bankruptcy Code. During 2019, we had the first circuit-level opinion in the bankruptcy/cannabis space that appeared to open the door to bankruptcy courts, albeit slightly. We also had lower court opinions slamming that door shut. Below, we look at a few of the most important decisions issued throughout 2019 and analyze the current state of the law.

The Ninth Circuit Court of Appeals’ Garvin Decision

In another loss for the cannabis industry, a district court recently affirmed the dismissal of chapter 11 petitions filed by companies that sold product used by both state-licensed marijuana growers and non-marijuana growers. The district court’s decision in Way to Grow, Inc. demonstrates that the door that was opened by the Ninth Circuit in Garvin v. Cook Invs.

We have written before about the virtual dead end faced by marijuana companies who try to seek protection in the bankruptcy courts. Almost uniformly, bankruptcy courts have shut their doors on marijuana companies, including their landlords and suppliers.