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Andrew King Digs Up Insolvency Laws in Article on Marijuana Business Failure

Publications - Article | August 20, 2018

American marijuana laws are evolving, but legal purveyors’ options are limited should their businesses fall behind, according to Little Rock partner Andrew King. He recently authored an article, “Not Enough Green: Sticky Problems from Insolvency in the Marijuana Business,” published in the Summer 2018 edition of The Arkansas Lawyer.

Unlike traditional businesses that fail or need to reorganize, the U.S. Bankruptcy Code does not apply to marijuana businesses. In fact, bankruptcy trustees are unable to administer marijuana assets or income derived from such businesses. This extends to less direct participants, such as employees, landlords, suppliers and investors. Mr. King explains that long-dormant state insolvency laws should be resurrected and applied to protect parties’ investment expectations.

“The most familiar state-law insolvency remedy is a receivership,” he writes, which is often sought “when a property owner does not have sufficient funds to maintain property or carry out its operations.” The remedy is designed to protect the interests of any creditors and parties to the action, and protect the property from injury, loss or destruction. Mr. King’s article sets out a number of possible actions for those involved. He emphasizes that Arkansas attorneys should pay special attention when drafting contracts, and familiarize themselves with decades-old insolvency laws that have grown dusty.

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