Case involves a former co-founder who raised concerns about the company's liquidity issues
The Ontario Superior Court of Justice has dismissed an application by a former director and shareholder seeking to wind up a corporation operating in the blockchain technology space.
Neeraj Srivastava, a shareholder, co-founder, former director and former Chief Technology Officer of DLT Global, initiated the application for an order to wind up the company under the Business Corporations Act (OBCA). Before establishing DLT Global, Srivastava carried on blockchain service activities in Canada as an incorporated Ontario business's sole director and shareholder.
In 2017, Srivastava was introduced to a businessman and investor, Loudon Owen, and they decided to enter into business together. They incorporated DLT Global to take part in the distributed ledger technology industry.
Srivastava and Owen's relationship eventually broke down because of alleged disputes concerning ownership of source code and patents and the termination of Srivastava's employment. Srivastava raised his concerns about DLT Global's liquidity issues and inability to meet ongoing financial obligations. He brought an application to the Ontario Superior Court of Justice, seeking an order winding up DLT Global under the OBCA.
The court addressed the legal grounds for winding up a corporation and examined whether DLT Global could continue its business despite financial challenges and substantial burn rates. The court concluded that Srivastava failed to demonstrate that DLT Global could not continue its business due to its liabilities.
The court also considered the "just and equitable" grounds for winding up a corporation under the OBCA. The court was satisfied that there was a breakdown of trust between Srivastava and Owen. However, the court rejected Srivastava's claim that DLT Global operated as an equal partnership. The court highlighted the substantial capital raised from outside investors and the ongoing scaling efforts in the blockchain technology space.
Ultimately, the court found that Srivastava had not proven that it was just and equitable to wind up DLT Global. It emphasized the potential negative consequences of such an order, including liquidating the company's assets, employee dismissals, and loss of investment opportunities.
The court dismissed Srivastava's application, emphasizing that other remedies were available for his claims, but he chose not to pursue them. The court noted that it has jurisdiction to make an order to remedy the alleged oppressive conduct on the part of DLT Global, but Srivastava did not plead a claim for an alternative order. Ultimately, the court decided to dismiss his application.