Web Summit backer David Kelly is suing co-founder Paddy Cosgrave and the company for oppression of shareholders' rights, in the second legal row to mar the hi-tech events business.
Barrister Frank Kennedy told the High Court on Wednesday that Graiguearidda Ltd, which holds Mr Kelly's shares in the business, has begun proceedings against Mr Cosgrave, his entity, Proto Roto Ltd and Web Summit holding company Manders Terrace Ltd.
Wednesday's hearing took place as the third day of the Web Summit was under way in Lisbon, Portugal.
Speakers at sessions there included Sky News presenter Kay Burley and Ricardo Mourinho Félix, vice-president of European Investment Bank.
Graiguearidda is claiming oppression of shareholders' rights under section 212 of the Companies Act, 2014.
An affidavit filed by Mr Kelly as part of the proceedings alleges aggressive and coercive behaviour towards him on Mr Cosgrave’s part.
It also claims that Mr Cosgrave used Web Summit resources, including cash, for his own mainly political endeavours.
Responding to these claims on Wednesday, Mr Cosgrave said: “Fantastic, I think it’s great, it’s up to the courts now”.
Affidavit
Mr Kelly’s spokesman confirmed that the businessman had filed a comprehensive affidavit on Wednesday detailing his shareholder oppression complaint against Mr Cosgrave.
“David is disappointed that Cosgrave’s actions have forced him to take this case, and looks forward to the court’s resolution of the matter,” the spokesman added. The issue is due back before the High Court on Monday.
Mr Kelly’s lawyers also confirmed to the court on Wednesday that he intended to vigorously defend a lawsuit taken against him by Manders Terrace alleging that he cost the Web Summit more than €8.6 million.
Mr Kelly co-founded the Web Summit with Mr Cosgrave. He owns just short of 12 per cent of its holding company Manders Terrace, through Graiguearidda.
Mr Cosgrave's Proto Roto owns 81 per cent. A third co-founder and shareholder, Daire Hickey, owns the remaining 7 per cent through Lasvisax Ltd.
Last month Manders Terrace alleged that Mr Kelly breached his duty to the company by attempting to secretly use the Web Summit’s resources to set up an investment fund for his own personal gain.
In an affidavit supporting that case, Mr Cosgrave said that Mr Kelly and Patrick Murphy had a established a limited partnership, Semble Fund II, in Delaware in the US, to act as their venture capital fund.
He claimed that Semble was a brand that Web Summit had used for several years in connection with its conferences.
Knowledge and contacts
Mr Cosgrave argued this was an attempt to establish a “secret” follow-on to Amaranthine Fund I, which the three had set up in 2018 to use knowledge and contacts developed through hosting the Web Summit conferences.
Manders Terrace claims that Mr Kelly’s breach of duty could cost the company €8.63 million.
It wants him to indemnify the company against any potential losses and is asking the court to order that Mr Kelly be held to account for any gains allegedly made at the expense of Manders Terrace/Web Summit.
Web Summit had invested $2 million in Amaranthine, Mr Kelly put in no capital while Mr Murphy contributed $250,000.
Mr Cosgrave maintained that it was always accepted that Web Summit’s investment and reputation were fundamental to Amaranthine’s business.
According to Mr Cosgrave, the fund ultimately invested $30 million in different ventures and the three began discussing a follow-on last Autumn.
He claimed that he only discovered Semble Fund’s existence after Mr Kelly had left Web Summit in April.
Mr Cosgrave said he had brought separate proceedings in California against Mr Murphy, Mr Kelly and three companies.
*This article was updated on November 4th to correct an earlier error
