More than 20 companies are working with CCC-approved receivers to stabilize rocky operations
There are currently 24 licensed Massachusetts marijuana businesses in receivership: four cultivators, five manufacturers, three medical treatment centers, and a dozen dispensaries.
According to the Cannabis Control Commission, in the commonwealth, receiverships for cannabis businesses “are appointed by a court through a legal process but are subject to specific regulations and approval by the CCC.” The agency calls the state-level process “a critical alternative to federal bankruptcy, which is unavailable to cannabis companies due to federal law.”
With countless businesses on the ropes for various reasons, at last Thursday’s public meeting Commissioner Kimberly Roy broke down how the process is supposed to work, starting with the following key steps:
- Initiation: A third party, typically a secured creditor, a business partner, or sometimes the business owner, files a complaint or a petition with the Massachusetts Superior Court requesting the appointment of a receiver.
- Notice to the CCC: The Licensee or Person Having Direct or Indirect Control must provide notice to the Cannabis Control Commission at least five days before filing the court petition.
- Court Order: A judge, following Massachusetts statutes and court rules, determines if there is cause to appoint a receiver (e.g., in cases of loan defaults, financial distress, fraud, or partnership disputes).
- Receiver Vetting and Approval: The court-appointed receiver is a neutral third party but must still be vetted and approved by the court. The Commission has promulgated regulations relating to qualifications of receivers seeking to become “Preapproved Court Appointees.”
Per a presentation at last Thursday’s meeting, “Once appointed by the court and approved by the CCC, the receiver takes control of the cannabis company’s assets and operations, essentially stepping into the role of management (like a Board of Directors and CEO).” From there, the “receiver’s main objective is to stabilize the business, preserve the value of its assets, and maximize recovery for creditors.”
With some exceptions, “The receiver manages day-to-day operations, including handling licenses, inventory, payroll, and ensuring ongoing compliance with all state and local cannabis regulations. They are subject to the same license caps and restrictions as other licensees.”
According to the CCC, “In essence, the receivership provides a structured, court-supervised process for managing a distressed cannabis business within the unique constraints of Massachusetts and federal law, ensuring the business continues to operate legally while financial issues are addressed.” But under the current system, it’s hard for the commission to ensure that is what’s really going on.
“As we know, the headwinds facing cannabis licensees in this state are continuing to grow stronger, and on the federal level, bankruptcy is not an option,” CCC Chair Shannon O’Brien said at the meeting. “[Receivership] is a public process, but we are trying to figure out what exactly we do here at the Cannabis Control Commission and how it’s launched.”
In her presentation, Commissioner Roy drilled down on the details of what she called “an increasingly important issue.” “These situations raise complex questions about who is actually in control of license operations, how compliance is maintained, and whether the commission receives timely and complete information on financial and operational decisions made under receivership,” she said.
Roy added: “What’s become clear is that the commission’s current processes do not provide sufficient visibility into the activities of these court-appointed managers.” Rather, she noted, it creates “uncertainty” for everyone from members of the public to employees of the troubled enterprise.
In an attempt to increase transparency, Roy drafted a form that would capture relevant information from receivers, and introduced a motion “to direct Commission staff to develop and implement, within thirty days, a process for monitoring cannabis business receiverships under the Commission’s jurisdiction.” The language continued:
This process shall include, but not be limited to, tracking the fees and expenses being charged by any court-appointed receiver to the licensee. The receiver shall be required to provide the Commission with bi-monthly written updates regarding the status of the receivership, including financial information and any material developments affecting the licensee’s operations or ownership structure.
Members approved the motion unanimously.
