Two Web Summit co-founders allege breach of profit-sharing agreement

Two co-founders of Web Summit have launched new personal proceedings against the company and its CEO and largest shareholder, Patrick Cosgrave, alleging breach of a profit-sharing agreement.

Separate but related actions against Mr. Cosgrave and Web Summit’s holding company, Manders Terrace Ltd, are brought by David Kelly and Daire Hickey.

Each alleges in their personal actions that the company and co-founder Mr. Cosgrave have annually breached an alleged profit-sharing agreement since 2013. The claims are denied.

With the consent of the parties, Judge Denis McDonald entered both cases on the Commercial Court expedited docket on Monday. He was told that the matter of the alleged breach of profit sharing has already been raised in separate proceedings brought by the plaintiffs’ companies.

A related action, by Graiguearidda Ltd, of which Portugal-based Mr Kelly is a director, alleges shareholder oppression against Manders Terrace, Mr Cosgrave and his vehicle Proto Roto Limited, which owns more than 80 percent of Web Summit. Graiguearidda owns Mr Kelly’s 12 per cent interest in Manders Terrace.

Hickey’s Lazvisax Ltd, which retains its 7 per cent stake in the technology conferencing company, has also launched shareholder oppression proceedings against Manders Terrace, Cosgrave and Proto Roto.

Expedited Trade List

Both cases were entered on the High Court’s expedited commercial docket last November and travel together, along with these new proceedings.

The court previously heard that the defendants would “strongly defend the proceedings”.

Manders Terrace has a separate action, taken in Ireland and the United States, alleging that Mr. Kelly breached his duty to the company by secretly attempting to use Web Summit resources to establish an investment fund for his own personal benefit. These claims have been denied by Mr. Kelly.

Kelly and Hickey’s new personal actions came as Cosgrave’s legal team withdrew a request intended to prevent shares in their companies from seeking a profit share. Bernard Dunleavy SC told the court on Monday that motions seeking to have profit-sharing claims in those actions dismissed had “obvious utility” and led to personal actions being brought.

In a court affidavit, Mr. Kelly, in his action, asserts that his shareholding in Manders Terrace was “inextricably linked” to a profit-sharing agreement allegedly made prior to the company’s incorporation in October 2010.

The deal, he claims, entitled him, and later his incorporation, Graiguearidda, to a share of Web Summit’s profits that was greater than the capital he or his company owned.

Revenue

He says Cosgrave made a “unilateral and impermissible decision” in late 2013 to stop distributing the profit share as allegedly agreed upon. He claims that he did not receive the €140,448 to which he was entitled for the 2013 financial year, and claims that the annual default continued from this point.

He claims that his company is entitled to 15 percent of annual profits from Web Summit events, as well as amounts from other companies subject to the agreement, such as sister tech event company F.ounders Event Limited.

In an open affidavit to the court in his action, Mr. Hickey notes that there are “significant factual overlaps” between his new personal action and the one brought by his company, as well as the actions brought by Mr. Kelly.

Hickey claims Cosgrave offered him a salary, stock and a share of the profits in November 2010 in what he said was an “opportunity to earn a life-changing amount of money.” He says he was entitled to between 10 percent of the profits from both F.ounders and Web Summit, but claims the defendants stopped making these profit-sharing payments in 2014.

He estimates that he is owed more than €1 million under the profit-sharing agreement.

The claims of the latter cases are also denied.

The cases were deferred to a later date.

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