On March 26, 2026, the U.S. Bankruptcy Court for the District of Delaware (Hon. Brendan L. Shannon) entered a provisional order in In re The Cannabist Company Holdings Inc., Case No. 26-10426 (BLS), extending stay protections to the non-debtor U.S. subsidiaries of a Canadian cannabis company whose parent is restructuring under Canada’s Companies’ Creditors Arrangement Act (CCAA). The ruling is notable because the protected affiliates are directly engaged in the cultivation, manufacture, and retail sale of marijuana — activity that remains illegal under federal law and that has historically barred “plant-touching” operators from obtaining relief in U.S. bankruptcy courts.

Background

The Cannabist Company Holdings Inc. is a Canadian-incorporated multi-state operator whose U.S. subsidiaries operate 54 retail outlets and 15 production facilities. Facing financial distress following a 2024 refinancing of approximately $180 million in secured notes, the company commenced CCAA proceedings in the Ontario Superior Court of Justice (Commercial List) on March 24, 2026, before Justice Dietrich, and filed a Chapter 15 petition in Delaware the following day seeking recognition of the Canadian proceeding as a foreign main proceeding.

The Foreign Representative sought provisional relief under sections 105(a), 1519, and 1521 of the Bankruptcy Code to give effect in the United States to the Canadian Initial Order, which had stayed actions against both the Applicants and their non-debtor U.S. subsidiaries (defined in the Initial Order as the “Subsidiaries” or “Stay Parties”). The relief was sought to preserve value while the Foreign Representative pursued asset sales — including announced sales of the Ohio and Delaware affiliates — and orderly wind-downs of the Pennsylvania and New York operations.

The U.S. Trustee’s Objection

The Office of the United States Trustee opposed the requested relief on two grounds. First, the Trustee argued that the Bankruptcy Code does not authorize a court to stay actions against non-debtor companies. Second, the Trustee objected that two days’ notice of the requested stay was inadequate, observing that the affiliates’ creditor list spanned 66 pages and that thousands of parties stood to be affected. The Trustee also expressly reserved its right to object at the recognition stage under section 1506 of the Bankruptcy Code, which permits a court to refuse Chapter 15 relief that would be manifestly contrary to U.S. public policy.

The Court’s Ruling

Judge Shannon granted the requested provisional relief and gave the Canadian Initial Order “full force and effect on a provisional basis” in the United States. The Order finds a substantial likelihood that the Foreign Representative will succeed in demonstrating that the Canadian Proceeding qualifies as a foreign main proceeding or, in the alternative, a foreign nonmain proceeding, and that additional relief under sections 362 and 365 will be necessary to effectuate the purposes of Chapter 15.

On the non-debtor stay question, the court relied on precedent permitting provisional relief in Chapter 15 cases coextensive with protections available in the foreign proceeding. Because the Canadian Initial Order already stayed proceedings against the Subsidiaries and their property, the court extended parallel protections in the United States, finding that the absence of such relief would expose the Debtors to a material risk of immediate and irreparable harm by allowing creditors to circumvent the Canadian proceeding through piecemeal collection efforts against U.S.-based affiliates and assets.

Importantly, the court did not address the section 1506 public policy question at this stage. That issue — whether recognition of a foreign proceeding involving federally illegal cannabis operations is manifestly contrary to U.S. public policy — was not before the court on the provisional relief motion and remains to be litigated.

Why This Matters

U.S. plant-touching cannabis operators have generally been excluded from federal bankruptcy relief because marijuana remains a Schedule I controlled substance, and courts have routinely dismissed such filings on illegality and public-policy grounds. Cannabist does not disturb that line of authority; the Debtors here are Canadian entities, and the U.S. cannabis operators are non-debtor subsidiaries protected derivatively through Chapter 15’s recognition of the Canadian proceeding.

What is novel is the court’s willingness, at least provisionally, to extend U.S. stay protections to plant-touching affiliates in a cross-border context notwithstanding the federal illegality of their operations. The decision suggests that, in the provisional relief posture, federal cannabis prohibition alone does not defeat the comity interests animating Chapter 15. Whether that conclusion holds at the recognition stage — when the section 1506 objection will squarely be presented — is a separate and harder question.

Issues to Watch

Several issues will determine the broader significance of this ruling:

  • Whether the court grants full recognition of the Canadian Proceeding as a foreign main proceeding, and how it resolves any section 1506 objection from the U.S. Trustee
  • Whether the provisional stay is extended, modified, or narrowed as the case progresses and as additional creditors weigh in
  • How asset sales of the U.S. cannabis operations are administered consistent with both the Canadian Initial Order’s “Excluded Property” carve-out (which limits the Monitor’s involvement with cannabis operations) and U.S. federal law
  • Whether other Canadian-parented cannabis operators with U.S. subsidiaries follow this Chapter 15 pathway as a restructuring tool

For now, the Delaware court has signaled that the cross-border insolvency framework can accommodate, at least on a provisional basis, debtors whose enterprise touches federally illegal cannabis operations — but the most consequential legal questions in the case lie ahead.