In 2017, a company was incorporated by three founders: The Plaintiff, and the First and Second Defendants. Each of the Plaintiff, and Defendants had holding entities that owned “their” shared in the company.
The company was formed to commercialise authentication and ID technology.
The Plaintiff was the then CEO.
A deed was entered intro by the Plaintiff and Defendants and their interests.
The Plaintiff said the founders has agreed they (or their companies) would always have an equal shareholding; a “communist model”.
The Defendants, and the Court, disagreed.
Plaintiff gave no evidence of that understanding and the deed expressly allowed for inequality.
Even if there had been such an equality it would not have survived the Deed because the deed included an “entire agreement” clause.
By July 2017 the Plaintiff was growing frustrated with the first Defendant, including about the amount of time that the First Defendant was (not) spending on the company.
Some of the issues were set out in lengthy emails.
Plaintiff’s frustration became a “burning frustration” over time.
In early 2019 a CTO other than the Plaintiff’s preference was appointed by the first and second Defendants and directed not to take instruction from the Plaintiff, which left the Plaintiff feeling undermined as CEO.
Shortly after, the Plaintiff attempted to resign as CEO, which the second Defendant did not accept, but which was eventually effective in 2019.
Plaintiff’s entity, as shareholder, brought a corporate oppression claim.
The Plaintiff’s entity failed on claims relating to the Plaintiff’s role as CEO: it was entitled to appoint a director and so participate in management that way, but had no direct rights in relation to the CEO role.
Despite some elements of the first Defendant’s conduct being unimpressive, the Plaintiff was not “forced out” as Plaintiff had resigned.
Later in 2019, the first and second Defendant’s moved to fire the new acting CEO without the Plaintiff’s knowledge, on Christmas Eve.
In January 2020 the Plaintiff objected to this and resigned in the following days.
At the time the company was in need of capital, had to retain staff, the Plaintiff had not contributed capital, and Plaintiff had elected to quit the board.
The First and Second Defendants resolved to convert their and the Plaintiff’s “wage loans” (unpaid directors fees recorded in the books as loans) into equity in the company.
Despite this, the First and Second Defendant’s made the conversion for their “wage loans” and not for the Plaintiff’s.
This conduct was found to be unfair.
Options were granted to the new CEO. Granting options to the new CEO was not unfair noting the commercial circs and the Court’s reluctance to second guess commercial decisions of directors.
Issuing options to fund-raise (thereby diluting the Plaintiff’s entity’s holdings) was not found to be unfair.
The Court sent the parties to confer on the right form of relief.
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