How to shut down a blockchain project?

Creating a new cryptocurrency or token involves substantial work over a long time by a dedicated team and every team involved with a blockchain project desires that its project is successful. Things may however not always go to plan and you may be required to plan to shut down your pet blockchain project.

There may be many reasons behind the need to shut down your project including technical problems, attacks by cyber criminals, lack of investor support, regulatory changes, and of course if there are unforeseen events such as a pandemic which makes working as a team impossible.

Deciding for shutting down a blockchain project may also involve a lot of stress and the lack of a clear bankruptcy framework for blockchain projects make it complicated and confusing for the founders. In this webinar, we will discuss the path for shutting down a blockchain project and how you can do it right.

At the onset, we would like to recommend that immediately when you realize that you may be required to shut down a blockchain project, you should get in touch with professionals who have experience with the legal aspects of winding down a business and also blockchain law before you proceed further. It must be borne in mind that the process involves substantial legal and financial issues that require guidance from experts and the sooner it is commenced, the greater the possibility for smooth and clean completion of the project.

Moving ahead, the first step in shutting down a blockchain project is undertaking a detailed review of the current status of the project and its assets and liabilities. This assessment is generally done by the legal counsel of the venture in coordination with the accountant and the management of the Company. At this stage, an assessment is also made if shutting down is the only resort available or if there is an alternative through which the project could survive.

Once, the management, the legal counsel, and the accountants have realized that the functioning of the company as a going concern is no longer feasible, the formal steps for winding down the venture may commence.

At the second step of the winding-up process, the legal professionals are expected to lead the process and prepare a detailed account of the different legal entities which would need to be wound up. A detailed analysis would also be required on separating the entities which could continue to exist after the winding-up process is complete. It is essential to ensure that no communication is made to any party regarding this process since communications about bankruptcy or winding up may be considered as sensitive in many jurisdictions and any information asymmetry among the different stakeholders may lead to liabilities.

The third stage generally involves the passing of a resolution by the partners or the board of directors to file for bankruptcy and winding up before an appropriate court or tribunal. There may be multiple filings required before different courts in many jurisdictions if many companies linked to the blockchain project are sought to be closed at the same time. During this third stage, the Company going forward for a shutting down process prepares a strategy to be presented to the Court or Tribunal as a part of the winding-up process. This strategy generally contains information about how the Company is going to settle the debts of the existing debtors and also contains a proposal for the appointment of an administrator who will operate the Company in the winding-up process and settle the claims of the debtors.

For blockchain companies who only have dues towards the token purchasers who could not be provided with a token or a functional project where the token could be utilized, an alternative may be provided wherein they may be given an option to receive another token. In exchange, a final settlement may be obtained from the token purchasers.

If the alternative for settlement cannot be reached and in cases where there is no such option, we move on to determine and finally check if documentation is ready for moving the courts in all required jurisdictions. The final checks are undertaken by the lead professionals who are coordinating the project on behalf of the founders.

When the documents are ready, the lawyers on behalf of the Company move to the fourth stage where they present their proposal to the Court for declaring insolvency and winding up. Compared to the bankruptcy process for normal companies where the debtors are general suppliers, service providers, and banks that had provided loans, in the case of a blockchain project, it may also have people who had made payments for a future token.

When the request for commencement of insolvency proceedings is accepted by the court, the administrator is requested to invite claims from all the debtors. The claims will then be accepted by the administrator and ultimately the court will decide the number of funds that will be received by each of the debtors after the settlement process.

At the final stage, when the time for submission of claims has been completed, the administrator may approach the court again to decide on a plan to sell off the remaining assets to interested buyers and settle the creditors.

While the different stages have been sought to be explained simply, they involve complex issues of law and experts need to be involved. Therefore, it is recommended that you get in touch with a professional in the area of blockchain insolvency at the earliest if you feel that you may need to shut down your blockchain project. We at Empire Global Partners have worked with hundreds of blockchain projects and we will provide you the necessary assistance to move ahead with the same. With our team of global experts, we are available to deal with requests for shutting down blockchain projects in multiple countries across the world.

Global Professional Consultancy Services Firm providing an array of specialized services to clients from all around the world. https://empireglobal.partners/