The Canadian cannabis industry has witnessed a series of financial shakeups in recent years, and the latest comes with Mernova Medicinal Inc. and its parent company Creso Canada Limited seeking protection under the Companies’ Creditors Arrangement Act (CCAA). On April 16, 2025, both companies officially applied for court-supervised restructuring due to overwhelming financial pressures.

This move not only highlights the ongoing volatility within the legal cannabis space in Canada but also opens the door for potential buyouts, operational changes, or even exits.

What Is CCAA Protection?

The Companies’ Creditors Arrangement Act is a federal law in Canada designed to give financially troubled corporations the ability to restructure their business and avoid bankruptcy.

When a company files under CCAA, it gains protection from creditors while it attempts to develop a restructuring plan. For cannabis companies like Mernova and Creso Canada, this means an opportunity to address massive debt loads without being immediately forced into liquidation.

Who Are Mernova Medicinal and Creso Canada?

  • Mernova Medicinal Inc. is a licensed cannabis producer based in Nova Scotia. It is best known for its Ritual Green brand, which is distributed across various provinces in Canada.
  • Creso Canada Limited, the parent company, is a wholly owned subsidiary of Melodiol Global Health Limited, an Australia-based firm that itself went into voluntary administration in December 2024.

Why Did They File for CCAA Protection?

Massive Debt Burden

According to pre-filing reports, Mernova and Creso Canada are facing over $14.2 million in liabilities:

  • $1.6 million owed in unpaid HST and excise taxes to the Canada Revenue Agency (CRA)
  • $3 million in unsecured debt
  • $9.6 million in secured loans
  • An internal debt of $16.7 million from Creso

The companies had been on a payment plan with the CRA, committing to monthly tax payments, but fell short as of January 2025.

Industry-Wide Challenges

Several macroeconomic and regulatory factors have squeezed the margins of licensed producers:

  • High excise taxes
  • Market oversupply
  • Price compression
  • Illegal market competition

Mernova is far from the only cannabis brand facing these challenges — but it’s the latest to make headlines for it.

Creditor Pressures

Two significant creditors, La Plata Capital LLC (owed $6.6M) and Briant Nominees Pty Ltd. (owed $2.9M), pushed for legal action that ultimately influenced the decision to seek court protection. Both parties support a Sale and Investment Solicitation Process (SISP) — a move that could lead to asset sales or external investment.

What Happens Next?

The court has appointed Grant Thornton as the restructuring monitor. The next few months will involve:

  • Reviewing operations
  • Identifying cost-cutting or revenue-improving measures
  • Soliciting potential buyers or investors
  • Protecting remaining assets

Sales for the upcoming quarter (April 7 – July 6, 2025) are projected to reach around $2.3 million, roughly matching the company’s expected operational costs. However, that revenue is not enough to address the debt burden, hence the need for protection and restructuring.

What This Means for the Canadian Cannabis Industry

Restructuring Trends Are Growing

Mernova’s filing is part of a growing trend. Over the past year, companies like Indiva, Aleafia, and even parts of Canopy Growth have gone through similar financial turmoil. These filings are a signal that Canada cannabis sector is still maturing and correcting itself after the post-legalization boom.

The Illicit Market Is Still a Threat

A major theme in these financial struggles is the resilience of the black market, which continues to offer cheaper, untaxed cannabis. Until excise taxes are adjusted or better enforcement is in place, licensed producers will face steep competition.

Investor Caution Ahead

With major players falling back or going under, investors are likely to become more cautious, focusing on leaner, more diversified cannabis companies with strong retail presence or unique product offerings.

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Conclusion: Is This the End or a New Beginning?

While it’s easy to see Mernova and Creso Canada’s situation as a failure, it could also be the start of a new phase. With the right strategy, partnerships, or buyout, the companies could emerge leaner and more sustainable.

For stakeholders — from investors to cannabis consumers — this is a case worth watching closely. The outcome may very well shape how smaller producers adapt to Canada’s evolving cannabis marketplace.

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