Big Four audit and consultancy firm PwC has published a guide for cryptocurrency companies experiencing financial difficulties or are on the verge of bankruptcy.
PwC notes that the two parameters that are used to determine the financial viability of the cryptocurrency company ― cash flow and balance sheet assessment — is often very difficult to ascertain because of cryptocurrencies volatility.
The document says:
"The lack of clarity on the accounting treatment of cryptoassets and as of yet, no broad consensus on taxonomy in the crypto world or how to accurately value cryptoassets, means that ambiguity may arise when evaluating the solvency status of your crypto firm.”According to auditors, once a company’s financial standing is in jeopardy, Directors ' duties shift from serving the best interests of their shareholders to those of their creditors. The document describes the likely loss of control by the leadership, civil penalties and even criminal charges in a situation where the Director can't properly manage procedures of bankruptcy of the company.
PwC has warned that in case of violations of the relations between the main creditors and Directors, the first can take decisive action for initiating the formal proceedings in the bankruptcy proceedings. The appointed liquidator has the legal right to investigate the methods of the Directors, which often ends with the initiation of civil and criminal cases against them.
However, in some cases director may retain the ability to independently and voluntarily to liquidate the company. PwC argues that in cases where jurisdiction is relatively friendly to debtors, the management may conduct a soft liquidation and to maintain control, while restructuring debts and paying creditors.
PwC specifically asked the firms that operate in several jurisdictions that, in the opinion of the auditors, quite common in the cryptocurrency industry. Concerning bankruptcy the document says that the principle of the Centre of Main Interest is used to establish which jurisdiction’s laws take precedence.
Recently it became known that a closed canadian cryptocurrency exchange QuadrigaCX is currently at the center of litigation and dispute, which began after the death of its Director in December 2018: this tragedy was allegedly deprived the firm access to most of its crypto assets.
This week the widow of the founder of the exchange, de facto are co-owner, was asked to appoint a chief restructuring specialist for a decision on the case. She cited her lack of experience with the bankrupt company and the extra public attention to the cause.