The Canadian Workaround: Why U.S. Cannabis Companies May Need a Canadian Entity to Restructure

NEW YORK- Cannabis has produced a workaround that shouldn’t exist—but now does.

If you’re a U.S. Cannabis company in distress, you can’t reliably rely on U.S. bankruptcy courts. So an emerging playbook is taking shape:

File in Canada. Then use the U.S. only to recognize it.

That’s exactly what The Cannabist Co. has done.

Cannabist did not file a standard U.S. bankruptcy. It and its Canadian affiliate commenced proceedings under Canada’s Companies’ Creditors Arrangement Act (CCAA), and are using Chapter 15 in the U.S. only to recognize that foreign restructuring—not to run a Chapter 11.

This wasn’t theoretical. It was driven by transactions already underway.

The company entered into definitive agreements to sell core parts of the business. In Ohio, it agreed to sell its operations to Holistic Industries for $47 million, consisting of $34.5 million in cash and a $12.5 million promissory note. In Delaware, it agreed to sell substantially all assets of its subsidiary to Parma Holdco for $16.5 million in cash.

At the same time, Cannabist signed a memorandum of understanding to divest additional operations across Illinois, New Jersey, Colorado, Massachusetts, Maryland, and West Virginia. This is a coordinated break-up of a multi-state operator—not a simple restructuring.

This follows an earlier move. The company had already sold its Virginia business for $130 million, using proceeds to pay down roughly $90 million of secured debt tied to its 9%–9.25% notes due 2028. Even after that transaction, a broader restructuring was still required.

Holders of more than 60% of Cannabist’s senior secured notes entered into a support agreement backing the asset sales, the broader divestiture plan, and the restructuring itself. Buyers were in place, creditors were aligned, and the company needed a court-supervised framework to execute.

(Image: David Hart CEO The Cannabist Co.)

That framework could not realistically be run through a U.S. bankruptcy court.

And that’s the part most people miss.

There is no true Chapter 11 equivalent for U.S. Cannabis companies.

Instead, operators are left with:
– Out-of-court negotiations with lenders
– State-level receiverships
– Assignments for the benefit of creditors
– Or piecemeal asset sales and wind-downs

None of these offer the clarity, protection, or coordination of a traditional restructuring.

That’s why this Canadian workaround matters.

Under the CCAA, the company receives a stay of proceedings, court oversight, and a court-appointed monitor to supervise the process while it completes asset sales and exits non-core markets.

Chapter 15 in the United States then recognizes that process so it carries across borders.

No U.S. court is actually running the restructuring of a Cannabis business.

A U.S. operator, selling assets across multiple American states, is restructuring through a Canadian court system because U.S. bankruptcy courts have generally been unwilling to administer plant-touching Cannabis cases.

And it leads to a very practical takeaway:

A U.S. Cannabis company cannot wait until distress to access this path.

You need a Canadian entity already in your structure.

If you don’t have one, your options are limited to fragmented, state-level workarounds.

If you do, you may have a real restructuring path.

That’s not legal nuance.

That’s structural advantage.