Dealing with crypto project failures
Commercial failure affects many business ventures, whether new or old. It affects companies of all shapes and sizes and across different industries. The cryptocurrency industry is governed by the same principles and crypto projects may fail. It is however essential not to get disheartened and instead look forward to a path of a clean closure from a failed venture so that you may move on to the next business. You can always come back with a new and better business plan which may then bring more success.
When a project fails, the immediate knee-jerk reaction is what frequently attracts the most attention. The immediate reaction towards a failed project by investors and many stakeholders is one of strong anger and may frequently be a backlash against the founders or promoters. This may be followed by a strong media reaction against the project and also inquiries by the regulators.
At this stage, any communication which is made in reaction to any queries must be made in strict compliance with guidance from your legal advisors. Even under this criticism, there may be people who may be willing to understand the commercial reasons behind the failure and the correct message must go out to them, since they may provide much-needed support.
While the normal reaction for any person under criticism may be to put forward a statement at the earliest to clear out the questions against him and also provide his version of the issue, it is best to maintain control on such a reaction. Communications by companies may have huge financial consequences and the situation should be clarified through measured statements vetted by legal professionals.
When the dust has settled on the immediate reactions, it is time to determine the future for your company, its investors, and the team of employees who have supported your business. In this path, the first step is to assess the current status of your company. To do this, you have to collect all available documentation of the company which lists critical information such as physical assets of the Company, the liabilities of the Company, IP assets held by the company, and also information about the employees and contractors of the Company.
This can be followed by a determination of the liabilities of the venture and also an effort at identification of the persons to whom funds are due. A clear division between different categories of persons to whom debts are due and also an understanding of if there is a path to settle them should be obtained. Dues that become payable immediately should acquire priority.
A failure of the business plan of the company does not mean that any assets which belong to the company disappear overnight. A clear inventory should be made of assets that are retained by the company and may come in handy to move the business forward at the end of the crisis. Core and non-core assets should be demarcated since an effort may be made to divest the non-core assets in a last-ditch effort to acquire funds.
A critical group that should be considered in every discussion is your employees who have supported you in your venture. Their perspectives may be taken on what they see as their future in the company and they should be informed if there are any options available for them.
While undertaking this entire review process, the opinion of professionals such as lawyers, accountants, and restructuring experts must be obtained at a step and you may also engage in discussions with them about their opinion on the future of the Company and the options that they prescribe.
It may be possible that one of the options that your team of legal and accountancy professionals provides is declaring corporate insolvency. Successful completion of the corporate insolvency process for your company may provide much-needed closure and an ability to move ahead from the failed venture.
A major advantage of successful completion of the insolvency process means that it would protect your directors and employees from consistent claims which may otherwise be raised by interested stakeholders. You must however contact a legal professional to determine whether your unsuccessful business venture may be able to benefit from voluntary insolvency. A successful insolvency process may be essential to safeguard everyone from future claims and dispute resolution.
Declaring insolvency may however not be the only option available to you if your business fails. Your lawyer or accountant may also suggest other methods if they believe that your business may have a chance to survive. These can include a restructuring of liabilities, additional time for payment of dues, and also the process of transmutation. In the transmutation process, crypto businesses that have not been able to generate the promised cryptocurrency may also provide a proposal to provide an alternative cryptocurrency to the buyers. For those who have already received the cryptocurrency token, a process may be provided for changing these tokens to another cryptocurrency, generally, one which is already established in the market.