In a stock exchange notice today (5 February), the board of SONG noted it had recently appointed Kastle Solicitors, independently of the other defendants, to review the claim, which was previously disclosed by the trust on 23 November and as part of it 2023 annual report.
The lawsuit has been brought by Quantuma, the liquidators of Hipgnosis Music Limited (HML), a company Mercuriadis co-founded and remains a director of, according to Companies House filings. It alleges he diverted the business of HML into his own operation, losing its investors millions of dollars in potential revenue.
The proceedings have been served upon Mercuriadis, HSM and SONG, with the trust’s regulatory filing noting HML is seeking to recover a “substantial but as yet unquantified sum” under the claim. At the time of the November 2023 update, SONG was not insured to cover the cost of dealing with the claim.
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Over the weekend, The Sunday Times published a report outlining further details about the claim filed last year, which alleges the idea for the company originally came from Afram Gergeo, who pitched the concept to Mercuriadis and Aeon Manahan during a meeting in Los Angeles a decade ago.
According to the claim, Mercuriadis, Gergeo, a fellow music industry executive later jailed for fraud against a pension fund in Malta, and Manahan, a British R&B and hip-hop artist, came up with the company name and logo and began work on the firm.
The initial plan involved a £50m bond issue on the Gibraltar stock exchange, supported by formal prospectuses, consultations and a five-year acquisition strategy.
However, the claimants allege Mercuriadis withdrew the prospectus in November 2017 and applied to wind down HML while he established two further Hipgnosis entities for himself, including the London-listed SONG.
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Quantuma claims Mercuriadis breached his duties as a director to HML by replicating the brand and business model for his own business, and that he breached the Perjury Act and/or the Insolvency Act by making misleading statements during the insolvency process.
A spokesperson for HSM and Merck Mercuriadis said “both parties deny the claims and intend to defend themselves vigorously”.
Last Friday (2 February), HSM announced Mercuriadis would step down from his role as chief executive to assume the role of chair at the firm. The move follows weeks of growing tensions between the firm and the refreshed SONG board, which was appointed following a series of departures, including that of chair Andrew Sutch, who announced his exit in September 2023, and directors Andrew Wilkinson and Paul Burger, who resigned a day prior to the October AGM.
Today, the board is comprised of Robert Naylor as chair, and Simon Holden, Francis Keeling, Christopher Mills and Cindy Rampersaud as non-executive directors.
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