The class action lawsuit against Kew Media Group has been certified to proceed to trial.

The Ontario Superior Court of Justice authorized advancing the case against two former executives of the now-defunct media company, CEO Steven Silver and CFO Geoffrey Webb.

The lawsuit was filed in mid-2020 with former KMG shareholders Alex Kan and Stuart Rath named as plaintiffs. The class action is meant to recover damages for KMG shareholders after the company was delisted from the Toronto Stock Exchange in early 2020. Kan had purchased 1,600 shares of the company on the TSX, while Rath purchased 30,000, according to the statement of claim.

It alleges that KMG’s senior team misrepresented its working capital to the market and failed to “properly manage and disclose fundamentally material information.”

While the company is insolvent, class members may stand to recover proceeds from the directors and officers insurance policy, set in place to protect executives from personal financial liability, if a judge rules in their favour.

KMG founder and chairman Peter Sussman and directors David Fleck, Maurice Kagan, Patrice Merrin and Erick Kwak were previously named in the lawsuit, but proceedings against the individuals have been discontinued.

Before it was removed from the TSX, the company had reported a revenue loss of 5.3% in Q3 2019. Weeks later, it announced the departure of Webb as CFO, citing inaccurate reports of its working capital, and entered a strategic review. By February 2020, the company was placed into receivership, with FTI Consulting Canada appointed as receiver, and the entire board of directors resigned.

According to law firm Foreman & Company, the class is defined as “all persons or entities who acquired securities issued by Kew Media Group Inc. in the secondary market between March 28, 2017 to January 16, 2020 inclusive, other than Kew Media Group Inc., and its directors and officers.” Any class members wishing to opt out of the action have until Jan. 10, 2022.

The class action notice specifies that the plaintiffs “have not yet received leave to pursue their claims against KMG under the Ontario Securities Act. These claims will not be certified until leave is obtained.”

A report from FTI Consulting, filed late last month, states that a class action motion has called for a lifting of an order that stopped the disbursement of KMG assets “for the limited purpose of allowing the class action to proceed.”

The motion has also directed the receiver to “facilitate the retainer of counsel to act for KMG.” The company has requested that the latter motion be denied as it would “impose significant cost and prejudice to KMG’s creditors for the sole benefit of the class action plaintiffs.”

KMG filed a lawsuit earlier this year against its former auditor Grant Thornton LLP through the receiver, seeking $100 million in damages for its failure to detect and disclose inaccuracies in the company’s financial reporting. The accounting firm withdrew multiple reports, including its audits on KMG’s financial reports, following Webb’s departure.

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