MJBizMag July 2020 - 69

Depending on the
type of bankruptcy,
businesses may be
able to continue
operating or be forced
to sell off assets.
Businesses facing more serious issues
like not being able to make payroll or
pay taxes might need to look seriously at
bankruptcy as an option, Novick said.
Hilliard said Atalo Holdings worked
closely with bankruptcy attorneys
to determine the best course of
action: Chapter 7 or Chapter 11. (See
" Bankruptcy Primer " on page 66 to learn
about the different legal bankruptcy
options.)
" The fact of the matter is the vast
majority of Chapter 11s end up being
liquidated or converted into a Chapter
7, " Hilliard said. " We looked at the
opportunity for getting some debtorin-possession
financing, and we didn't
see that that was immediately available.
We didn't have the cash that we thought
we would need to live through a long,
extended Chapter 11, and we thought
going directly into Chapter 7 was a
more expedient resolution of the issues
that we had. "
What Happens in Bankruptcy
In a bankruptcy filing, all of a company's
books and records are subject to full
disclosure to the bankruptcy court,
Novick said.
The court requires:
* A written business plan for
the future.
* A list detailing creditors and leases.
* Cash-flow projections and cash-flow
history.
* Monthly operating reports showing
income expenditures and cash flow.
* Accounts receivable and accounts
payable.
* A list of all assets owned
by the company.
* A breakdown detailing any and all
liabilities owed.
" That's why lawyers want to meet with
companies ahead of time, so we can
know what those disclosures look like
and decide whether bankruptcy is the
most appropriate action, " Novick said.
In a bankruptcy case filing, the order
of creditor claims that are paid-and how
much are paid-are beyond the company's
control, Novick said.
" There are specific priorities
established by the bankruptcy code, and
once the money comes in, the court is
going to have to look at all the factors
and the claims to determine what assets
there are and what distributions can be
made-and those are established by the
bankruptcy code, " she said.
In Chapter 7 bankruptcy, the company
isn't required to submit a written plan for
the future. Hilliard said the process has
not been simple or easy, and COVID-19
has complicated matters even further.
But the time spent since the bankruptcy
was decided upon and filed has been
more productive.
" We are spending our time now in productive
pursuits, which means talking to
people about what the opportunities are if
they are to submit a bid and buy the assets
of the company, " Hilliard said. " Prior
to the bankruptcy, we spent a considerable
amount of time talking to creditors
who were trying to collect the debts that
were due to them, and that was cutting
significantly into the productive time for
generating revenues for the company. "
Laura Drotleff covers hemp as a reporter
for Hemp Industry Daily and Marijuana
Business Magazine.
July 2020 | mjbizdaily.com 67
http://www.mjbizdaily.com
MJBizMag July 2020

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