Chapter 15: A New Path for Cross‑Border Cannabis Restructuring

The Cannabist Company Holdings Inc. (The Cannabist Co.), a Canadian cannabis company, recently undertook a cross-border restructuring involving both Canada and the United States. In Canada, it commenced proceedings under the Companies’ Creditors Arrangement Act (CCAA), which provides a framework for financially distressed companies to reorganize. In the United States, it initiated a related case under Chapter 15 of the U.S. Bankruptcy Code, which governs cross-border insolvency proceedings.

What is Chapter 15 bankruptcy recognition?

Enacted in 2005 to implement the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, Chapter 15 is designed to promote cooperation and communication between U.S. courts and foreign tribunals. It allows a foreign representative to access U.S. courts to protect assets located in the United States and to coordinate multinational restructurings.

A U.S. bankruptcy court typically recognizes a foreign proceeding as either a “main” proceeding — meaning the debtor’s center of main interests (COMI) is in another country — or a “non-main” proceeding, meaning the debtor’s main business is in the U.S. but it has an establishment or assets in another country. Recognition as a foreign main proceeding triggers an automatic stay in the United States, preventing creditors from pursuing the debtor’s U.S.-based assets.

The Cannabist Co. ruling: A breakthrough in Delaware bankruptcy court

On May 9, 2026, the U.S. Bankruptcy Court for the District of Delaware granted Chapter 15 recognition to The Cannabist Co.’s Canadian proceeding while expressly reserving the rights of a secured lender that had argued recognition would violate U.S. public policy. Although the ruling was fact-specific and issued without a written opinion, it nevertheless supports the use of Chapter 15 as a viable tool for non-U.S. cannabis-related companies seeking U.S. stay protection and asset coordination without automatically prompting an objection by the Office of the United States Trustee (UST), the “watchdog” of the bankruptcy system within the Department of Justice. This is notable given the UST’s longstanding practice of seeking dismissal of domestic bankruptcy cases involving cannabis on the grounds that ongoing cannabis activity violates U.S. federal law.

Navigating the Controlled Substances Act and public policy exceptions

The Cannabist Co.’s Chapter 15 case highlights the tension between recognizing cannabis-related insolvency proceedings and enforcing the federal prohibition on cannabis under the Controlled Substances Act (CSA). In most cases, cannabis remains a Schedule I controlled substance under the CSA, rendering its manufacture, distribution, and sale illegal under federal law, notwithstanding state or foreign regimes that permit such conduct. (On April 23, Acting Attorney General Todd Blanche signed an order reclassifying FDA-approved and state-licensed medical cannabis to Schedule III.) As a result, U.S. courts generally have refused to grant bankruptcy relief to domestic cannabis businesses where administering the estate would require federal participation in ongoing violations of the CSA.

The Chapter 15 context, however, is analytically distinct. The primary statutory basis for denying Chapter 15 recognition is the “public policy” exception, which courts construe narrowly. A mere conflict between foreign and U.S. law is insufficient; the conflict must be “manifestly contrary” to fundamental U.S. public policy. Importantly, this analysis focuses not on whether the debtor’s conduct violates U.S. law, but on whether the foreign proceeding itself provides procedural protections consistent with U.S. standards. Because Canada’s CCAA is a well-established and sophisticated insolvency regime that closely parallels Chapter 11 in the U.S., its framework is unlikely to trigger the public-policy exception.

Why Chapter 15 differs from domestic cannabis bankruptcies

Moreover, Chapter 15 does not require the same level of U.S. court involvement in the debtor’s ongoing operations. Unlike in a domestic bankruptcy case, a U.S. court does not administer the estate or oversee the debtor’s business. Instead, its role is ancillary: protecting U.S. assets and facilitating coordination with the foreign proceeding. This distinction may explain the UST’s decision not to object to recognition in The Cannabist Co.’s case. In Chapter 15 proceedings, the UST’s role is more limited and discretionary.

The timing of The Cannabist Co.’s filing — coinciding with federal efforts to reclassify cannabis from Schedule I to Schedule III — may also reflect an evolving federal posture toward cannabis-related issues. Consistent with this trend, some U.S. bankruptcy courts have recognized the mere presence of cannabis-related activity in a case does not, by itself, require denial of relief.

The recognition order in The Cannabist Co.’s Chapter 15 case represents a meaningful development in the cannabis industry’s ability to access U.S. bankruptcy-adjacent protections. While domestic cannabis companies continue to face significant barriers due to the CSA, this case demonstrates that Canadian-incorporated companies with their COMI in Canada may successfully obtain Chapter 15 recognition and its attendant benefits. As a result, such companies may enjoy a comparative advantage in restructuring distressed operations across borders.

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Leah Eisenberg, Esq. is a partner at the law firm Pashman Stein Walder Hayden PC. Her practice encompasses corporate reorganization, corporate trust default, intercreditor matters, bankruptcy litigation, cannabis-related financing, and cross-border representation. She represents debtors, creditors, indenture trustees, committees of unsecured creditors, lenders, bidders, and acquirers.