Cannabis Knowledge & Insights

Options for Cannabis Businesses with Cannabis Debt

In any business endeavor (especially in the cut-throat cannabis industry), it’s quite easy to fall into a tough financial position that puts a deep strain on the business. 

It could be as simple as a founder dispute that turns very ugly very quickly, to investor fraud or even embezzlement by a key team member. 

Another common issue you see is cannabis debt and high-interest rate loans that are personally guaranteed that can no longer be paid…so what do you do?

Unfortunately, you cannot file for cannabis bankruptcy, but it’s possible to get a court-appointed cannabis receivership who may be able to help you get on solid ground or out of the business entirely, if necessary.

If you are experiencing any issues within your cannabis business that are causing a financial strain on the company, then please reach out to us today, and let’s see if we can help you find a solution.

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Full Transcript:

Again, thank you for joining our webinar today we’re, we’re going to discuss options for struggling cannabis businesses. Now there are many types of struggles, financial struggles, people and HR struggles, product struggles and everything in between. And we’re going to try to address some of the common struggles that we see through our clients and people that come through the business and how to remedy some of those struggles and options that are out there for you. And this presentation is brought to you by GreenGrowth CPAs. Now a little bit about us before we get started, GreenGrowth CPAs is a cannabis only tax preparation and financial firm. We help with everything from tax preparation, audits of businesses, business valuations, financial compliance, outsource, CFO duties to help you really get a grasp on the numbers of your business all the way through IPO readiness, taking your cannabis company public to the markets. We have hundreds of active clients in multiple States around the country as well as international clients as well. And we service all verticals in the cannabis industry, from the cultivators to the manufacturers to the testing facilities, distribution companies, retail delivery services. So anything cash and cannabis are from GreenGrowth CPAs can help you out with.

Now before we get started with the presentation, I need to let you know that the information contained in this presentation is meant for guidance purposes only and not as professional legal or tax advice and further does not give any personalized legal tax investment or any business advice in general.

So let’s review what we’re going to cover today. So first I’m going to give you a little bit of cannabis industry context and what we’re seeing going on right now. Then we’re going to discuss what is receivership. We’ve talked about this a fair amount. I’ll brush over it, kind of give you a little color and context to that and then we’re going to talk about the types of receivership. Then I’m going to go through five examples of cannabis business struggles that can benefit from using receivership that includes partner or co-founder disputes, landlord and tenant issues, embezzlement, theft and diversion, deceiving investors, and then mismanagement of funds. Then we’re going to talk about the benefits of receivership. I’m going to give you four main benefits and how that can improve your business while you’re in one of these struggles or these scenarios that can put strain on the business.

Then we’ll talk about a quick process overview of receivership and then a few final additional considerations. The first, some cannabis industry context relevant to right now, so in 2018 and 2019 you saw those were big years for investments. There was a lot of money pouring in from family offices, institutional investors, and then even the small time angel investors and there were some equity investments, but there were many more high interest loans that were coming due. So it’s a lot of way over leveraged companies with lopsided balance sheets right now in 2020 now some people haven’t even gotten licensed and they’ve taken on all this debt and they’re still sitting out a $12,000 a month lease that they can barely afford or maybe their business is just not profitable as they thought it could be when they first started getting into the industry and they’ve gone through a certain tax filing or tax year.

And they’re like, wow, there’s really not that much money in this business. If you don’t execute exactly perfectly. Now many cannabis businesses are not working out how investors, our co founders thought lots of internal conflict, but then moves into the blame game. Co-founders mad at each other, investors mad at cofounders, and it all results in a downward spiraling business if he was even up to begin with. You know, some of these businesses don’t even get off the ground. But again, you get liquidity problems, high competition and tough regulation that really impacts these cannabis businesses and holds them down in this green rush that everybody was sold on. It turned out to be potentially a green flop. Now also what you’re seeing is that many people saw cannabis as a get rich quick scheme. They were attracted by the cash, heavy nature of the business, and that kind of compelled them to commit some pretty bad financial crimes, whether that’s embezzlement or fraud or tax evasion, theft, nonpayment of certain things.

And what you’re gonna understand now in the industry is that cash crimes are the new drug crimes and these people will get caught. There’s very little issues around the cannabis portion. It’s more about where’s the money at, how’s it being spent? Are taxes being collected and things like that. Now, there is no bankruptcy for cannabis businesses. So those debts, they stick around for life because most of these debts are personally guaranteed. They will stick to the person who signed on that dotted line. Now there’s two ways out. Either you get forgiven by the creditor and good luck on that cause it’s probably not going to happen. Or you go through a court appointed receivership and allow the court to untie you from these obligations or help you liquidate your company so you can pay off any debts or any issues with the business and it allows you to kind of get in front of the problem before it becomes catastrophic.

And you may be saying, I’m already in a catastrophic problem. Then you really need to pay attention to what we’re going to talk about today because it can really, really help you out, help you, your cofounders and your investors out later down the road or right now. So next, what is receivership? Now, as we covered in a previous video, since cannabis is federally illegal, that means that filing for bankruptcy protection, which is a federal protection, is not an option for cannabis operators. So the next best option for cannabis businesses that are in some type of financial trouble or at a crossroads with investors is something called receivership. And these debts that the cannabis businesses have do not just magically go away if the company fails or if they ignore their obligations. This is not tech, this is not where you take out some VC money and this all goes away because it could parlay up to the owners or the equity holders.

Again, especially if these are personally guaranteed loans and in most cases they are. So it’s important that you go through some type of legal process to untie the company from its obligations. So incomes, receivership, which is a financial process where a trustee, which is a legally appointed custodian, it’s put there by the court. They come in and they step into either restructure the company to avoid total insolvency, which is typical bankruptcy territory. Or they can attempt to turn that business around or they can help to liquidate assets and pay off obligations and get the debt paid back to the investors and everybody walks away feeling a little bit better about the situation. Now it has been a common remedy for struggling cannabis businesses and even ordinary businesses to try receivership before going to bankruptcy court because many of the details don’t have to go and be public and receiverships have become very popular during the last market turned down in 2008 2009 and we did a deeper dive on receivership.

I’ll put the link to the video in the description of the replay for this and you’ll be able to see kind of more of the details of the process. But I want to talk about something tangible that you can sink your teeth into and hopefully, or maybe not hopefully cause I don’t want anyone to be struggling but kind of point out some issues that we see are common in the industry. If it resonates with you, maybe receivership is an option you should explore. So now that you understand what receivership is and a little bit of industry context, I want to talk about the types of receivership. Now there are two primary types of receivership and the names are pretty self explanatory. So first you have a full receiver and this is where the court appoints the receiver and he or she will take away all the rights from the business or the party and manages the whole business on their own.

So pretty much the receiver runs the entire company top to bottom. Now they can bring teams in to help with any specific duties, right? Like accountants or lawyers or operations teams, but they are the C level team, they are the ops team and everything in between. And you see this commonly in fraud or embezzlement cases as well as if there are huge, huge conflicts between partners or co founders and business owners pretty much have lost all control of their company at this point. So it’s best to exercise all other solutions before resorting to this type of receivership. Next you have a limited receivers, so this is where the court appoints a receiver, but the business and the owners are still able to work and operate their business, but the receiver has access to all the information and can step in at any time. You’ll see this commonly if there’s a simple founder dispute or heightened landlord and tenant issues or very minor mismanagement of funds, and you’ll also see this when the parties are trying to work amicably together, right?

There’s not just like this huge, huge heated debate. Everyone says, okay, we’ve got a problem here. Let’s work together to solve this. Now you see this, especially if the company is still profitable or is turning a profit. To some extent, there’s no sense in killing a business by giving away all the direction in the management from the people that made it profitable, especially if it’s still driving revenue, creating value for the shareholders and everyone is just doing their best to rectify the situation with the least amount of damage. Again, if people are working amicably together, you will likely look at to a limited receivership or we call next is a court appointed observer. In this is where the party or the cannabis business is under court order and a receiver becomes the eyes and the ears for the judge and the court. Now in most cases, if no huge crimes have been committed, things like embezzlement or fraud or tax evasion, the court will start here.

Now what this does is it can buy the client time to get organized and refocused and during the observer period, the receiver handles all the assets in the financial issues and then the clients of the cannabis business seeks help from business development professionals such as lawyers, consultants, or accounting firms like green growth CPAs. Now the benefit to going this route is that there’s now a record that the business has failed, but there was no liquidation of the business. And I’ll get a little bit more into that later down the road. And we talk about some benefits of receivership. So now that you understand a little bit more about receivership, that types of receivership, I want to go over five examples of cannabis business struggles or conflicts that can benefit from entering into receivership. So first partner and cofounder disputes. Now I’m going to go and break this down into three aspects.

For each example, we’re going to talk about example scenarios, how our receiver can help as well as an ideal outcome or some type of outcome for each scenario. Now for the example scenario, you may have two of the three co-founders in the business that want that third lazy co-founder kicked out of the company. So they began to cut this person out of key meetings or they start treating them poorly or making big decisions without their input. And these decisions are huge. The direction of the company, essentially, they’re not sticking to the operating agreement and not using the remedies that are in there to have this person removed or had them relieved of their duties. And you’ll see this with very petty or new inexperienced founders who have just not been in the business world that long because agreements like an operating agreement are in place for a reason.

If you want someone out, there is a remedy in the operating agreement on how to take them out. Now, another example was when two, three or four founders are in a business and they have a huge difference in how they should fix a specific financial issue within the business and no progress is being made in more damage is being done to the company overall. Now you may even also see this with HR issues between co founders or the founders and some employees that could spark this type of, you know, dispute. That’s just really, really impacting and put a heavyweight and a financial burden onto the business. Now, how a receiver can help in this situation or these types of scenarios, what they can do is they can come into the company and oversee the operations and be the mediator to solve the issues between cofounders, right?

Sometimes you say, okay, the investors can come in and kind of talk some sense into the guys and gals in the business, but that doesn’t always work. Sometimes you need a real separate neutral third party to help with these types of conversation and when you get that external party to bridge the communication gap and lay layout all the facts and not let the emotions become mixed in, you may get a better result and they can also help bring the investors to the table and help them have their voices heard in their concerns voiced in the situation as well. It makes sure that everyone’s walking away with what they need out of this scenario, which leads me to the ideal outcomes. What you can do in these couple scenarios is create either an exit plan for that one founder or two founders that are not carrying their weight or even come up with a new operating agreement where everyone’s voice is heard and their positions are taken into consideration and you know, work from there.

You could also find a new way of operating the company. Maybe breaking it apart into two different or three different types of sections because maybe that co-founder really likes one aspect of the business, right? Reorganizing the duties or even the business overall and help achieve a majority of the goals of all the constituents or the stakeholders in the business and then get the outcomes that are desired again by the cofounders and or the investors. And lastly, another outcome that comes from this is breaking the company up in selling it off, especially if there’s a very, very heavy debt or a financial issue that cannot be solved and no one has a good idea except for liquidate the assets, sell off the business and pay back the debts. Now next is landlord and tenant issues. And you see this a lot in cannabis because the landlords know that they have these cannabis businesses by the skin of their teeth and okay, well they can kind of push them around and do some pretty wild stuff to them.

So an example scenario, a tenant maybe took on a lease that they can no longer afford either due to an underperforming business or maybe they’re not even licensed yet and they’re running out of cash, right? They may have taken on this lease and you see this often in cities where you have to secure a property before getting licensed and then through the licensing process it takes six or eight or 12 additional months now, $12,000 per month for 12 months as $144,000 not everybody has that as sideline cash, so this can put a huge strain and then the business owners just stop paying. Or maybe you also see if a landlord is not holding up their end of the deal and maintaining a property or certain promised upgrades or TBI budgets were not given, and then this cuts into the business’s ability to operate and maybe they can’t generate revenue from the full building.

Maybe they’re only at half capacity due to some issue with the landlord, and then maybe that becomes a huge, huge financial issue overall, especially if there’s external investors involved waiting for their money to be paid back. So how can I receive her help in this scenario? They can be a neutral third party to review all of the financials and create a communication between tenants and the landlord. And it’s very easy to assume that tenants are lying, they’re all about their financial situation is not true, or the landlord is being a total jerk and not being reasonable. But Hey, look, you signed the lease, now you need to pay. Or if you’re a landlord and you promise to do something in a contract, then you need to fulfill on it. But maybe there’s some type of way that the receiver comes in, reviews that financial situation helps negotiate and come to some type of temporary terms that can be helpful for everybody to get what they’re looking for.

So outcomes that come from this type of scenario is potentially reduced rent until licensing comes through or they help find a new tenant. If the business didn’t get licensed and they’re stuck with this lease with no alternative use case or they say, all right, look, the T I’s have to be done immediately by or by a certain date or they sell the assets or ownership of the business or part ownership of the business to the landlord to align incentives, right? Bringing everybody to say, all right, as a business is more successful, the landlord is more successful. This helps take sometimes the burn rate off of the business on that rent. So those are some ideal outcomes from this scenario. Next is embezzlement, theft or diversion of cash. And it’s sad to say, but you see this a lot in cannabis. Being a cash heavy industry, it’s very easy to just peel off a couple of thousand dollars every couple of days or every week or you know, $10,000 a month.

You know, it’s very, very hard to keep track of cash. That’s why no, we would love to have banks. And so let’s go over an example scenario or a few of them here. So first one, maybe there’s a cofounder or a high level employee that makes a deal with an external company for rates that are really unreasonably high and then it’s getting a kickback on the payments to that business or to that brand. You see this very, very commonly people that have been in the industry a long time, they start competing or complimentary companies. Then both those companies get additional co-founders in them. But the people that are in common between the two companies make these kinds of side deals and are pulling money out of the business in an illegitimate way. And this can put a huge financial strain on the business and also lead to those co founder or partner disputes once it’s found out that they did this.

Or you may have a key employee that’s blatantly stealing cash from the business regularly or all in one big push. And you see this quite often at the retail level. That’s why you need an intense amount of camera coverage. Two people counting cash every time and division of duties for the cash handling. So how can a receiver help in this scenario? Well first they can come in immediately and take over the operation from the bad actors. And what this helps to do is preserve the business or at least stabilize the operation and get it back to either break even or continue to generate a profit or stop the bleeding. It’s also could be some place where receiver could kick off some investigations into what is actually happening financially in the business. You know, get a forensic accountant in there too, can learn about all the movement of the money, all the agreements within the business, and then potentially get some subsequent litigation to recover some of the stolen or diverted cash from the business and get it back to the business.

Now some outcomes from these types of scenarios is that the company gets to stay operating if they’re liquid enough and have the money to continue to operate, you know they can get back on track financially and recover as much cash as possible and the offending party is removed from the business and potentially some charges are filed against them. Or another scenario or another outcome from this scenario is that you sell off the business. Depending on the level of embezzlement or fraud or sell off some key high value assets to cover any other financial obligations and pair down the business, especially if this is a vertically integrated business, there’s a lot going on in vertical integration. It’s very easy to let someone play in their own little sandbox for quite some time. They find a way to sneak some money off and then that just collapses the whole distribution side of the business or it collapses the whole retail side of the business and you have to refocus on the vertical that you’re really good at or that generates the most cash for the business.

The next scenario I want to talk about is deceiving investors, and you’re starting to see this a little more often because these high interest loans or even they’re not even high interest rate loans, just a lot of loans are becoming due and people can’t cover their debt service for a variety of reasons. So an example scenario, co-founders took out a debt investment. Again, typically high interest rate, 10 to 15% and they can’t cover the debt payments or the business produced very, very little revenue and maybe it closed down or wound down. Now most of these debts are personally guaranteed. There’s very, very few contracts that we’ve seen that get signed without some type of personal guarantee. Now when this happens, right, the business doesn’t produce as much revenue or they can’t cover that debt payment, the investor’s going to find out that maybe the cofounders overstated their capabilities to run this business or they find out the cofounders misused funds in ways that were not discussed in the use of funds when they made that investment or maybe the money was used to not grow the business, but for personal enrichment of the cofounders, that is very, very, very bad.

It’s very deceiving by the cofounders and they can be in some pretty deep hot water with that and in these scenarios you typically see very little progress being made in the business. This is usually for the businesses that kind of got a little bit of revenue and they had to wind down because they ran out of cash, but you could also see it in businesses that were successful, took out an additional amount of debt to scale up the business, but they had no idea how to go from 10,000 units a month to a hundred thousand units a month. They blew all that money. Now they’re personally on the hook for that cash. Now how receiver can help, so what they can do is come into the business in a full receiver capacity and stop the bleeding of the cash, especially if the business is still operating and then they preserve the asset values.

If there’s any valuable assets in the business, whether that’s the real estate behind the business, the machinery, it could be some types of product on there, anything that’s of value vehicles, things like that. Then that receiver can also investigate the financials to see if there was any intentional misuse of funds or deception by the cofounders towards the investors, and then they could help to potentially, if the business is saveable to create a refined business plan, cut dead parts of the business out, especially again for these vertically integrated businesses and make sure that they can, you know, move to a place where, all right, let’s start in this vertical, cut everything else out, create some cashflow and then reopened distribution or then reopened cultivation. Let’s focus only on the retail. A receiver can pretty much come in, become the entire operating team for that company and they’re not going to do this alone.

They will bring in professional teams to help run this business. They are not super woman. They are not Superman. They have to get help from teams. Now outcomes from this type of scenario is the sale of all the assets to recover the money loan to the business or the investor purchases the business outright by just using the original investment into the business. You could say, all right, well if you want to still be in the cannabis industry, mr or mrs investor here, take the entire business and all the assets and then you can have it. You’re using an open bidding for these types of businesses, but if no one over outbids you, you get to keep the business and move from there. And you know, usually when you kind of work on these scenarios, you try to find a way where the debtors or the business owners walk away debt-free.

That’s not always the case, but you can either significantly reduce the debt or reduce it all the way. And the last one I want to cover here is the mismanagement of funds. Now, example scenario I want to talk about is, you know, you hear the word CFO thrown around a lot, especially in cannabis startups and it’s usually given, or that title is usually given to the person with the most experience and money. Maybe someone who was an accountant at a big company, or maybe this person just has a finance degree and they’re right out of B school, whatever. It doesn’t matter. It just gets thrown around a lot. And these people definitely make big, big mistakes, especially if they do not have experience. And one of the common mistakes we see that these quote unquote CFOs make is avoiding their tax bills or throwing them away or misusing the tax funds that they’ve collected as operating capital.

And then now they have no money to pay for their taxes or they’re just putting off the company’s obligations without understanding the ramifications or the penalties or the fees that come along with not paying taxes. And it puts a company in an extremely bad spot financially. So how our receiver can help in this scenario is that the receiver can come in, review the books, and help the business get a full sense of what their financial is and what they truly owe out to either their creditors as well as out to any agencies that are tax collection agencies or anything in between. You will usually in likely see a receiver bring in an accounting firm, an experienced accounting firm like GreenGrowth CPA’s. We were brought into a scenario exactly like this and we brought in a forensic accountant and they helped to really peel back the layers in this case or in these types of cases because in many instances the person that is exhibited a dereliction of their fiduciary duty is likely to have been making bad financial decisions and potentially what we call fixing the books or making numbers out to be what they’re not actually.

So this becomes into investor fraud and a whole whole bunch of other things that you really don’t want to be into as a cannabis business. This is very, very hot water. You do not want to be him. Now, some outcomes that come from this type of scenario is that when you bring a receiver in and the accounting firm and the forensic accountant, you get a grasp on the gravity of the situation and you’ll have a plan outlined on how to meet your obligations. And what the receiver will do is work with the creditors and the accountants will help work with the creditors. If this is a misuse of investment funds and work out a plan to appease the investors, which could include again, selling off the assets and paying back the investors that way, or giving up equity in the business and many other options, maybe even selling the business back to those investors for their initial investment.

Now each case is so unique such that you really need to know how bad the scenario is first and then find a remedy. And that’s really a cool part about receivership is that these receivers can be very, very creative in finding solutions. The court gives them a large, large amount of freedom in making things whole and happy for pretty much everybody involved. And that brings me to the next part of this presentation is the attractive benefits of receivership. So I’m going to cover four benefits here. There are many, many others, but I want to talk about again four that are going to help you understand the value of a receivership and why you should consider this, especially if there’s some kind of financial strain on your cannabis business right now. So number one, the goal of the pointing receiver is to lessen the case length and avoid extended litigation.

And as you know, most legal cases go for three to five years or you may not know that, but now you know, so going into receivership really shortens the dispute and lessens the legal fees because everyone wants to get back to work and just do their job. No one wants to be in a dispute longer than they have to be and what you’ll learn in the next slide is that receivership is always kicked off by some type of litigation. If the investors feel they’ve been deceived or there is some type of embezzlement, there will be a complaint filed in court and then the court will then bring in a receiver to help take over and take control of the business. And a benefit of, you know, kind of getting this done faster through receivership is that it’s significantly less publicized then these large huge court cases you can bring someone in, turn the business around.

The details don’t have to go into all these different motions in the court in a four or five year case. You can just get it remedied through receivership relatively quickly. Number two is that receivership has proven to be more cost effective than going to court with an attorney. You know, you’ve seen attorney hourly rates and imagine going through a three or four year court case where you’ve got to constantly pay out to your attorney. You can’t just have them build up some very, very large bill. Not everybody works on contingency and imagine losing that case and have to pay the other side’s attorney fees as well for three or four years. So if you’re willing to negotiate in good faith and you’re ready to get out of your problems with the least amount of financial damage, then requesting receivership through the court could be a solid option for you and help you save a lot of money through the process.

Now number three is a less talked about, but very important benefit of receivership. So if the cannabis operator is working with a receiver, they can say that their operations are being overseen by a court and this helps to build credibility. It’s similar to like a stamp of approval or same type of validity to the business and it creates a greater credibility and authority when you’re dealing with employees, customers, vendors, creditors, and anybody else, right? It’s not just some rogue cannabis company. The court is overseeing these matters to make sure that they’re done right now, the receiver can come in and operate and stabilize the business in anticipation of a sale or help with the turnaround of the business. Either way, it’s great to have the court involved and as an added bonus to using receivership is that it could maintain or even increase the value of the underlying assets within the business because that stamp of approval and the ability for the receiver to bring in experts to replace the current ownership, the troubled ownership can say, all right, this is a good asset to move in on our good business to buy, especially if you’re going for an M and a transaction.

Now number four, with full receivership, you can place someone into the business to safeguard and preserve assets as well as stop any fraud that’s going on. So in those investor fraud or embezzlement or theft or diversion cases, it’s very, very important in those types of cases to get the people out of the business right away and put someone in their receiver to stop all the issues or to at least put an arrest to them for the moment being, and this is especially important as well as in those nasty, nasty founder disputes where there’s a huge disconnect in where two, three or four founders think they should take the business or how they should solve a financial problem. So now once the full receivership has gone on, they can really bring in the teams to build up the business or to kind of figure out what’s going on, how to sell off these assets, find strategic buyers for these things and kind of preserve and bring out as much value from those assets.

And then the receiver can then Institute any litigation to recover any fraudulently conveyed assets as well as, you know, get a quick investigation into the debtor’s financial affairs. When you go into full receivership, the management of the business has given directly to that one person in their team that they bring in. The whole C level team is taken out. You know, the ops team can be taken out. It’s at the discretion of the receiver as well as what powers that the court gives us receiver. But at any rate, what I’m getting at is that once you set this person in there, you really get to get a full light shined onto the business and really see all the details that if the current management was in there, they would do their best to hide these issues. So now that you understand some scenarios as well as the benefits of receivership, I want to just go over quickly an abbreviated explanation of the process of receivership.

So first you’re going to see some type of questionable behavior or a reason to believe that some type of crime has been committed. Likely some type of financial crime like fraud or embezzlement. And from there a complaint is going to be filed in court. And this receivership process again all starts with some type of litigation to get the courts involved in the business. Now the law firm of the cannabis business is then made aware that a client needs help or there has been a complaint filed against them. And then from there the receiver is sent by the court to, you know, look at the business, understand any conflicts of interest and make sure that he or she can be a neutral third party in this matter. Now a receiver is similar to a bankruptcy trustee and they can kind of see and oversee many aspects of the business.

So they need to make sure that they stay neutral so that they’re not incentivized to do anything that’s you know, wrong or not ethical. So from there, once neutrality is established, a stipulation is created in court between the receiver and the cannabis business. Where the partners and the clients. So then you go through the stipulation process and pretty much what this does is it brings everyone together and everyone starts, you know, fighting it out in the interview room and you know, talking and throwing things out and kind of laying the entire landscape of the scenario out there. And the receiver is going to talk to them individually, you know, kind of trying to bring some common ground there that can be on the record, that can be off the record. And then once they kind of figure out what’s going on, all the facts are laid out, the court will then outline the duties appropriate for the receiver for this specific case.

Because not every case is the same. They all have their different nuances in what needs to be done by the receiver. Now from there, both sides of the case agree to the said stipulation in the last step from the court and now the receiver can actually get to work. And this is where a lot of the processes at. So, for example, if financial crimes have been committed, they would bring in that forensic accountant to investigate and comb through the books. Or if there’s a mismanagement or founder disputes, they could manage the business back to success or stabilize the business or they could execute specific sales of assets to recover some value for the investors or the creditors. You know, the stipulation will give the outline of the duties and the tasks. The receiver is to complete to remedy the situation. Now from there you wrap up and end the engagement and at the end of this engagement, the receiver either takes on all the assets and the debt and can sell it or the dispute is ended.

You know, it could have been some minor thing where they kind of had to kind of play the mediator and it’s all over and end with and you know, the partners proceed with business as usual. It’s all on a case by case basis. But what you need to understand is that it starts with some type of litigation and receiver is brought in. The facts are laid out, the court tells the receiver what they need to do and how to get to a resolution. The receiver goes in and does all those things and then they wrap up and tie up this engagement. It’s not something permanent. And then I want to review just to last additional considerations. So first you need to understand what is your intended outcome before starting all of this. Now both parties will have separate desires and separate wants and needs, but you gotta at least know where everyone sits.

Do you want to keep the business open? Do you want to close it down? Do you want to recover funds or do you want to buy out the business as an investor? Or do you want to remain partners? Or do you want to go your separate ways and break up the business because the cofounders can not agree on anything. You just really need to know what you want out of this. And if you don’t know, just say that right? But you should kind of have some idea of how you want the future to look for your business and for your specific scenario. And then lastly, you want to also say, all right and look at what other options have you tried before resorting to getting the courts involved in your business. Because again, remember this all kicks off with some type of initial litigation. Maybe you found someone was embezzling money and they took all this cash, but if you just come and ask them, maybe they just give you all that cash back and there’s no need to get any court involved in this.

It’s all been remedied, at least made whole financially. Of course, it’s going to be some personal issues there. And you may want to file some type of criminal charges, but you don’t have to get a receiver involved to recover those funds if you’ve already gotten them back. Now, once a receiver is put into place, especially for full receivership, you’re not in control any longer. So make sure you exercise other options before resorting strictly to receivership. And that’s where you know, talking to a service firm like GreenGrowth CPAs, we seen this many, many times and we can say, all right, have you tried this or this or this? And then if not, make a plan with you on how to explore receivership for your cannabis business. Now we’ve covered a lot of ground here, so I want to review a few key takeaways. So first, receivership is a process that can get you out of your debt obligations and or help turn your business around.

It’s a very, very widespread array of what the receivers can do for your business, but getting out of your debt obligations, receivership is the only way, pretty much to get out of those obligations. Now, next receivership can be used in a variety of scenarios in a full or limited capacity as dictated by the court depending on the situation and it can benefit and even be kicked off by investors and it can benefit operators as well. If you have these founder disputes, bring a receiver in to help be that middle ground and help you remedy these issues and potentially go on to grow your business. To new Heights. Number three, receivership can be incredibly cost effective compared to long drawn out legal battles. No one wants to be in court. No one wants to pay high attorney fees. Explore receivership and use that to remedy your scenarios and your situations that you’re in and those struggles that you’re going through with your cannabis business.

And lastly, receivers have broad powers given to them by the court, which allows them to be creative and find solutions to help remedy the specific scenario situation that you’re in. When you start to see and look through some of these cases, you can see kind of the creativity that these receivers have and can use to fix up these scenarios, make sure people are walking away with what they want in how they want to walk away. So hopefully this webinar has brought you some value and helped you to understand receivership and some specific scenarios in which it can be helpful for you as a cannabis business operator and a cannabis business investor. Now, if you need help with exploring receivership for a business that you’ve invested in or a business that you’re operating, then please reach out to GreenGrowth CPAs via our website at www.GreenGrowthCPAs.com or give us a call at (800) 674-9050 we’ve been a part of a lot of these different types of struggles for cannabis businesses and help people untie out of these issues and see kind of how this shakes out and how this all plays out. And we want to give you the benefit of our experience to make sure that you’re getting what you need out of your cannabis business and putting yourself in the right position to make the right financial choices. So if you need help with exploring receivership for your cannabis business that you’ve either invested in or one that you operate, and reach out to us via our website at www.GreenGrowthCPAs.com or give us a call at (800) 674-9050 have a great day and we’ll talk to you soon.

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