Web Summit shareholders allege breach of profit sharing agreement

David Kelly and Daire Hickey take separate actions against Paddy Cosgrave and company

Two Web Summit shareholders have brought fresh personal proceedings against the company and its chief executive and main shareholder Patrick Cosgrave alleging a breach of a profit share agreement.

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

Each alleges in their personal actions that the company, which organises tech conferences, and its co-founder Mr Cosgrave have been in annual breach of an alleged profit share agreement since 2013. The claims are denied.

On consent between the parties, Mr Justice Denis McDonald entered both cases into the fast-tracked Commercial Court list on Monday. He was told the matter of alleged breach of profit share has already featured in separate proceedings brought by the plaintiffs’ companies.

A connected 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 Ltd, which owns more than 80 per cent of Web Summit. Graiguearidda owns Mr Kelly’s 12 per cent stake in Manders Terrace.

Mr Hickey’s Lazvisax Ltd, which retains his 7 per cent share in the tech conference firm, also issued shareholder oppression proceedings against Manders Terrace, Mr Cosgrave and Proto Roto.

Both cases were entered into the High Court’s fast-tracked commercial list last November and are travelling together, alongside these new proceedings.

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

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

New actions

The new personal actions from Mr Kelly and Mr Hickey came as Mr Cosgrave’s legal team withdrew an application aiming to prevent their firms’ actions from pursuing a profit share. Bernard Dunleavy SC told the court on Monday that the motions seeking to have the profit share claims in those actions dismissed had an “obvious utility” and led to the personal actions being pursued.

In a sworn statement before the court, Mr Kelly, in his action, claims his shareholding in Manders Terrace was “inseparably linked” to a profit share agreement, allegedly made prior to the company’s incorporation in October 2010.

The agreement, he claims, entitled him, and then upon its incorporation, Graiguearidda, to a share of Web Summit’s profit that was greater than the equity he or his company held.

He says Mr Cosgrave made a “unilateral and impermissible decision” at about the end of 2013 to cease distributing the profit share as allegedly agreed. He claims he did not receive the €140,448 he was entitled to for the 2013 financial year, and claims the annual breach was continued from this point.

He claims his company is entitled to 15 per cent of annual profits from Web Summit events, as well as amounts from various other ventures subject to the agreement, such as the sister technology event company F.ounders Event Ltd.

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

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

He estimates he is owed more than €1 million under the profit share agreement.

The claims in the latest cases are also denied. The cases were adjourned to a later date.