In Canada's evolving cannabis industry, entering a restructuring process such as under the Companies' Creditors Arrangement Act (the "CCAA") is no longer seen as a failure, but rather as a tool to preserve business continuity and long-term value. However, navigating the CCAA process is only one part of the journey. For licensed producers, maintaining credibility with regulators, distributors, and the marketplace is just as critical as managing legal proceedings.
This article outlines key challenges and reputational strategies for cannabis companies undergoing restructuring.
Excise compliance: Maintaining the license and the relationship
The Canada Revenue Agency (the "CRA") continues to play a central role in overseeing the cannabis sector, particularly in relation to excise duty. Misconceptions persist about the CRA's credit and collateral policies; however, the agency has clarified that its guidelines on credit terms and bond coverage are publicly accessible.
Maintaining an excise license throughout the CCAA process is non-negotiable. The CRA expects companies to remain compliant and transparent and conducts thorough assessments to determine appropriate bond or collateral levels for companies emerging from restructuring. Open and frequent communication is essential to building trust with the CRA, especially when negotiating excise-related matters.
Operational excellence in the eyes of the OCS
From the perspective of the Ontario Cannabis Store (the "OCS"), entering CCAA proceedings is not penalized. However, it can divert internal teams from day-to-day operations, which can result in reduced fill rates and lower sales performance. While the OCS maintains a business-as-usual approach during a company's CCAA filing, it continues to prioritize operational efficiency and market performance.
Simply put, legal proceedings do not excuse poor marketplace execution. Companies must maintain high service levels and fulfillment standards if they wish to preserve shelf space and customer trust.
Leadership accountability and early engagement
A recurring concern raised by industry advisors is the delay in seeking professional guidance. Many cannabis businesses wait too long to acknowledge their financial or operational challenges, often allowing issues to escalate unnecessarily. Setting aside ego, embracing a proactive approach, and engaging restructuring professionals early can mean the difference between stabilization and deeper operational risk.
Effective leadership during a restructuring period is also essential to restoring confidence among suppliers, regulators, and investors. This includes building a 13-week cash flow model, working closely with the court-appointed Monitor, and maintaining a disciplined communications strategy.
Restoring confidence post-restructuring
Emerging from CCAA proceedings is not just a financial reset – it's a reputational one. Rebuilding trust with stakeholders requires clarity, transparency, and improved governance. Cannabis companies seeking to re-establish their market position should focus on:
- strengthening internal controls and accountability;
- reaffirming commitments to tax compliance and regulatory reporting; and
- maintaining clear communication with all levels of stakeholders, from the CRA to retail partners.
While the CRA and OCS are not punitive in their handling of insolvency proceedings, they expect consistency, compliance, and operational discipline – expectations that extend well beyond the courtroom.
Strategic reminders for cannabis operators in transition
- Engage early. Don't wait for a crisis to initiate restructuring conversations – proactive planning creates more options.
- Communicate openly with regulators. Both the CRA and OCS value transparency and consistency. Build relationships before problems escalate.
- Protect your operations. Legal proceedings should not overshadow the importance of product delivery, inventory management, and customer service.
- Lead with clarity. Strong leadership, including the use of a Chief Restructuring Officer (CRO), can guide your company through complex transitions.
Next steps: How we can help
Our Restructuring and Insolvency Group works closely with businesses throughout the lifecycle of restructuring, from regulatory communication strategies and tax negotiations to monitor coordination and post-CCAA transition planning. Whether your organization is preparing for a restructuring or navigating its aftermath, we can help protect your operational capacity and rebuild business confidence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
