Cannabis Firm CannTrust Announce Settlement of Class Action Lawsuits and Board Changes

CannTrust Holdings Inc., a Canadian licensed cannabis producer, with a portfolio of brands including estora, Liiv, Synr.g and XSCAPE, announced on Thursday that its Fourth Amended & Restated Plan of Compromise, Arrangement and Reorganization plan (CCAA) dated July 7, 2021, has been implemented.

“The Company has contributed $50 million to a trust established to facilitate the class action settlements in full satisfaction of the actions against it and $2.7 million in trust for settlement of various claims under its CCAA proceedings,” announced the firm in a press release.

The implementation of the CCAA Plan follows its approval by the Ontario Superior Court of Justice on July 16, 2021 and the approval of the US class action settlement by the United States District Court Southern District of New York on December 2, 2021.

In their class-action lawsuit, the plaintiff alleged the share price of CannTrust declined after July 8, 2019, when the company received a compliance report from Health Canada that explained how one greenhouse facility in Ontario was non-compliant with regulations. According to the class-action lawsuit, the regulator saw cannabis growing in five unlicensed rooms. 

As planned, upon the implementation of the CCAA plan, four directors of the Company resigned from the board of directors with immediate effect. CannTrust has accepted resignations from chairman of the board Robert Marcovitch, along with directors Mitchell Sanders, Mark Dawber and Shawna Page.

CannTrust In Default

CannTrust also announced that “the CannTrust Group does not have sufficient liquidity to operate beyond the near term.

“Notwithstanding the significant progress made by the CannTrust Group in these proceedings, including successfully obtaining the reinstatement of its licenses from Health Canada, restructuring its operations, resuming production and processing operations, reaching key settlements, and the development, approval, and sanction of the CCAA Plan, the Canadian cannabis industry generally, and the CannTrust Group specifically, have faced challenges. As a result, the CannTrust Group does not have sufficient liquidity to operate beyond the near term,” management said.

“CannTrust is in default of the minimum EBITDA covenant under its DIP loan.”

Image By Ilona Szentivanyi