A fund which invests in music royalties has said it will “vigorously defend” itself against legal proceedings.
Hipgnosis Songs Fund said it was facing legal proceedings over allegations of diverting business opportunities.
It comes a month after shareholders voted for the £1bn trust to be wound down.
The High Court claim comes from Hipgnosis Music Limited which entered liquidation in 2018.
The proceedings were served to Hignosis founder, Merck Mercuriadis, the investment adviser and Hipgnosis Songs Fund Limited.
It alleges business opportunity was diverted away from Hipgnosis Music Limited, where Mercuriadis was previously a director to the new company and investment adviser and also claims the company “unlawfully assisted” with or received this diversion.
An update from the company reads: “Mr Mercuriadis, the investment adviser and the company deny such claims and intend to vigorously defend them
“The company is not insured as to the costs of dealing with this claim.”
In October 82.3 per cent of Hipgnosis Songs Fund shareholders voted against the fund remaining open.
This forced the company to work on proposals for the reconstruction, reorganisation or winding-up of the company.
These options are expected to be put to the shareholders in the music royalty fund within six months.
The Hipgnosis portfolio includes the music rights of artists such as 50 Cent, Barry Manilow, Blondie, Shakira and Neil Young.
But over the past three years the fund has lost 29 per cent, with 11.3 per cent lost this year so far.
Speaking to FT Adviser in September, David Merriam, investment manager at Evelyn Partners, said that in addition to the money raised from investors, the trust had borrowed to buy music catalogues, then they would, during a period of buoyant equity markets, issue new shares at a premium to repay the debt.
“But when interest rates rose, the debt costs rose, and that happened at the same time as equity markets fell, so they were not able to issue shares to pay down the debt they had,” he said.
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