Cannabis Receivership: Preserving License Value Through Court-Supervised Restructuring

Matter Overview

A cannabis operator with three active dispensary licenses and a cultivation license became the subject of a state court receivership proceeding initiated by its secured lender following a payment default. The core legal question was whether the receiver — appointed under state commercial law — could maintain and ultimately transfer the cannabis licenses during the receivership, or whether the change of ownership triggered by receivership appointment required immediate MED notification and a potential license suspension pending regulatory review. The outcome would determine whether the licenses had any value in the receivership estate or whether they would lapse.

Work Performed

Hoban was retained by the proposed acquirer — a strategic operator that saw an opportunity to credit-bid the distressed licenses. Our role was to advise both on the regulatory mechanics of receivership-to-transfer and on the change-of-ownership filing strategy.

We researched the state's prior regulatory guidance on receivership-initiated license transfers and identified a 2019 administrative determination in which the MED had approved a receiver-managed license pending transfer without triggering the suspension-on-filing provision — on the basis that the receiver was not a "new owner" under the statutory definition but a court officer maintaining existing operations. We presented this precedent to the MED in a pre-filing inquiry before the receivership order was entered.

Hoban then structured the credit-bid acquisition as a two-phase transaction: Phase 1 was the receivership appointment and MED notification (preserving the existing licenses under receiver management); Phase 2 was the change-of-ownership filing for the acquirer, timed to coincide with MED's completion of its receivership review to avoid a gap period. We drafted the receiver's operational protocols to satisfy MED's compliance continuity requirements during the interim period.

Outcome

All four licenses were preserved through the receivership and transferred to the acquirer via credit bid. Forty-seven employees retained their positions at the three dispensary locations through the transition. The total credit-bid value was $6.2 million.

Lessons Learned

Cannabis receivership is a practice area most commercial restructuring counsel are not equipped to handle because it requires deep familiarity with state licensing law layered onto commercial insolvency procedure. The MED's "receiver as officer" interpretation is not universal — it applies in some states and not others. Knowing which states have that precedent (and how to invoke it) is the difference between a license preservation and a license lapse.

Engage Hoban Law Group

Hoban Law Group advises cannabis lenders, receivers, and acquirers on distressed asset and receivership transactions. [Schedule a consultation](/consultation?source=matter&matter_slug=cannabis-receivership-restructuring-2023&matter_type=cannabis-litigation).