A Michigan-based cannabis company has filed for Chapter 11 bankruptcy protection, but the proceedings could be tricky.
Master Equity buys or leases property and subleases it to cannabis businesses while providing services like accounting and payroll.
The company is facing between $100,000 and $500,000 in total liabilities.
But according to MJBiz, Master Equity could face a difficult bankruptcy process since it indirectly profits from cannabis, which is still illegal under federal law.
Bankruptcy courts do not typically hear cases for companies involved in the cannabis industry.
But Robert Hendricks, senior counsel for Warner Norcross+Judd LLP, said the company might get its case through since it doesn’t touch cannabis.
If Master Equity’s case goes through, it could be a first for a company that’s licensed to cultivate and sell cannabis.
However, the U.S. Trustee Program assured the publication that “provisions of the Bankruptcy Code cannot be used to aid in the violation of federal criminal law."