A Kalamazoo, Mich., cannabis company’s recent chapter 11 filing will test some particularly murky legal waters and could potentially set a legal precedent for other cannabis-related businesses facing insolvency, MiBiz.com reported. Master Equity Group LLC on April 20 filed with the U.S. Bankruptcy Court in the Western District of Michigan under subchapter V of the federal bankruptcy code, a relatively new but frequently used measure designed to expedite the bankruptcy process for small- to mid-sized companies. In court filings, Master Equity CEO Adam Tucker described Master Equity as a “holding and management company for several related-entity businesses operating in the cannabis industry.” In this role, Master Equity Group buys or leases property to sublease to cannabis businesses along with providing accounting, payroll and other centralized functions. Kalamazoo-based Cannamazoo Recreational Weed Dispensary is one such brand. Represented by Mark Shapiro of Southfield, Mich.-based Steinberg Shapiro & Clark, Master Equity Group faces between $100,001 and $500,000 in total liabilities. The company owes its top 18 creditors a total of $176,255, per the filing. Master Equity Group profits from its involvement — albeit indirectly — in the production, marketing, sale and distribution of marijuana, which is still illegal at the federal level. As part of the Controlled Substances Act, marijuana is listed as a Schedule I controlled substance, which is deemed to have no accepted medical use in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse. U.S. Trustees generally do not allow businesses affiliated with cannabis to seek protection under the bankruptcy process, leaving the fate of the Master Equity Group case hanging in the balance.
