More than 75% of the U.S. population lives in states that have legalized cannabis for adult and/or medical use.

Pursuant to a 2022 directive from President Joe Biden, a 2023 recommendation of the U.S. Department of Health and Human Services, and a scientific review released in January supporting the HHS's recommendation, the U.S. Drug Enforcement Administration is now evaluating whether to reclassify cannabis as a Schedule III drug.

In contrast with a majority of bankruptcy courts that routinely dismiss cannabis-related cases for perceived violations of the Controlled Substances Act (CSA), the U.S. Bankruptcy Court for the Central District of California in the recent opinionIn re Hacienda, No. 2:22-BK-15163-NB, (Bankr. C.D. Cal. July 11, 2023), refused to conform to the same historical standard. Instead, the Bankruptcy Court struck down the U.S. trustee’s motion to dismiss not once but twice in favor of confirming a marijuana business’ Chapter 11 plan of reorganization.

Background

In Bartenwerfer v. Buckley, the Supreme Court of the United States resolved confusion in the lower courts over the scope and application of 11 U.S.C. § 523(a)(2)(A), which prohibits debtors from discharging debt through bankruptcy when such debt was obtained as a result of fraudulent actions.

In In re Roberts, No. 22-10521, 2022 WL 4592086 (Bankr. D. Colo. Sept. 23, 2022), the Bankruptcy Court of the District of Colorado (the “Bankruptcy Court”) held that a Debtor’s alleged ownership interest in cannabis-related companies did not require a dismissal of the case and that a Chapter 7 trustee could administer the Debtor’s assets. This represents a significant change from prior decisions from this Court, which has usually dismissed any bankruptcy case involving cannabis.

Background

In brief

The courts were busy in the second half of 2021 with developments in the space where insolvency law and environmental law overlap.

In Victoria, the Court of Appeal has affirmed the potential for a liquidator to be personally liable, and for there to be a prospective ground to block the disclaimer of contaminated land, where the liquidator has the benefit of a third-party indemnity for environmental exposures.¹

In brief

Australia's borders may be closed, but from the start of the pandemic, Australian courts have continued to grapple with insolvency issues from beyond our shores. Recent cases have expanded the recognition of international insolvency processes in Australia, whilst also highlighting that Australia's own insolvency regimes have application internationally.

Key takeaways

In the recent decision of Paragon Offshore, No. 16-10386 (CSS), 2021 (Bankr. D. Del. June 28, 2021), the U.S. Bankruptcy Court for the District of Delaware (the court) addressed the issue of whether the Office of the United States Trustee (OUST) could collect its quarterly fees against assets that were previously transferred to a litigation trust (the litigation trust) free and clear of any and all claims, liens and other encumbrances pursuant to a confirmed plan of liquidation.

In brief

With the courts about to consider a significant and long standing controversy in the law of unfair preferences, suppliers to financially distressed companies, and liquidators, should be aware that there have been recent significant shifts in the law about getting paid in hard times.

In brief

In brief

Creditors commonly find that their applications to wind up a company are suddenly deferred at the last minute by the appointment of a voluntary administrator.  Now, in the early days of the small business restructuring (Part 5.3B) process, the courts are already grappling with those circumstances in the context of that new regime. At the time of writing1, only four restructuring appointments under Part 5.3B have been notified to ASIC. Two of them have been the subject of court proceedings.

The resulting decisions reveal: