The Swiss court in Zug, the Handelsblatt, Trado GmbH, Bloomberg and a shareholder of Envion AG have now confirmed that the bankruptcy court of Zug decided to liquidate Envion AG on 14 November 2018.
As already reported, the reason for initiating liquidation was that Envion AG did not appoint an auditor within the time limit set by the court. Envion AG therefore suffers from a so-called "lack of organs" which, according to Swiss law, leads to the liquidation of the company in the absence of remedy.
The investigation report of the enforcement proceedings initiated by FINMA has also been published in the meantime, but is still under lock and key for the Envion ICO's investors.
However, if the investigation report is included in the liquidation or bankruptcy proceedings, it will form part of the bankruptcy files and it should be possible at that time to make it available through the general right of inspection in the files of the Bankruptcy Office.
As soon as the decision of the Cantonal Court of Zug has become final, Envion's liquidation proceedings will be conducted in accordance with the principles of bankruptcy law. Articles 197 et seq. of the Federal Act on Debt Collection and Bankruptcy (SchKG) shall apply.
The opening of bankruptcy proceedings is published in the Commercial Register and in the Swiss Official Gazette of Commerce (SOGC).
The first step for the investors of Envion ICO and other EVN token holders will be to identify themselves as creditors by writing to the Bankruptcy Office and to designate an address in Switzerland as their delivery domicile. This has the advantage that the debt call (see immediately) is notified to the investors or the delivery domicile by post (Art. 233 SchKG).
CLLB is already working with a Swiss law firm that can provide the necessary delivery domicile for investors. Claims by Envion ICO investors that are not filed will not be taken into account in the bankruptcy proceedings.
The debt call consists in the public announcement in the Swiss Official Gazette of Commerce that the creditors must file their claims in bankruptcy (Art. 232 SchKG).
Investors must then file their claims within one month of the announcement.
It is questionable how the bankruptcy office will assess the legal status of the EVN token holders.
The following considerations currently exist:
- The investor's claim to repayment of the contribution. According to Section I.II.2 of the Subscription Agreement, USD 1.00 per token must be repaid to the investor after a maximum of 30 years. The opening of bankruptcy proceedings against Envion, however, results in the immediate maturity of this claim (Art. 208 para. 1 SchKG).
- Pursuant to Clause B.II.1 of the Subscription Agreement, the claim for repayment is to be made in Ether.
- In Switzerland, bankruptcy petitions must be submitted in Swiss francs.
- If the previous Swiss case law for foreign currency debts is applied for the calculation of the claim entry, which is based on the exchange rate on the day the bankruptcy was opened, then the conversion would probably have to take place as follows:
- On the day the bankruptcy is opened, USD 1.00 per token must be converted into ether using the daily exchange rate, and then this number of ethers must be converted into Swiss francs using the daily exchange rate.
- This franc amount must be entered as a claim in the bankruptcy proceedings.
A special question could arise with regard to the significance of Art. 208 para. 2 SchKG, according to which non-interest-bearing claims satisfied prematurely in bankruptcy (i.e. those which actually would not have been due yet) are to be discounted at a rate of 5%.
- Since the EVN tokens still have a very long term of approx. 29 years, discounting would mean a considerable discount. It will therefore probably have to be argued that the receivables were interest-bearing and the promised profit participation represents the interest.
- With regard to the statement in the prospectus that the tokens do not confer any right to the "liquidation proceeds" (point V of the prospectus), we assume that in the event of a dispute the following argument would have to be put forward: In accordance with the principle that the tokens do not confer dividend rights and therefore no shareholder rights, liquidation proceedings must be translated as liquidation surpluses. This is merely intended to clarify that the investors as lenders do not participate in liquidation surpluses in the event of liquidation, as these are due to the shareholders.
- In point G.II of the Subscription Agreement, this idea is formulated somewhat more clearly in this way: "The Tokenholders shall have no shareholder rights [...] The Tokens do not convey any right in a liquidation surplus.
- An interpretation according to which the investors waive their claims in the event of a bankruptcy liquidation seems very unusual and, in the event of a dispute, would at best have to be examined with the appropriate contractual instruments (control of general terms and conditions, rule of unusualness, etc.).
The first step will be the filing of claims for investors and EVN token holders.
Any legal proceedings by investors against Trado GmbH and personally liable persons and bodies remain unaffected by the bankruptcy proceedings in Switzerland and will be continued before the German courts.
Legal proceedings against Envion AG will no longer be initiated. The claims against Envion AG are now being filed as part of the bankruptcy proceedings, explains the CLLB Rechtsanwälte team.