By Yadarisa Shabong
(Reuters) -HML, a former business of Hipgnosis Songs founder Merck Mercuriadis, has launched a legal action against the struggling music royalty fund, its investment adviser and Mercuriadis, accusing them of stealing a "business opportunity".
Hipgnosis Music Limited (HML), founded in 2015 and now being wound up, served proceedings alleging "a diversion of business opportunity" from HML to the London-listed fund and investment adviser Hipgnosis Song Management, which were both later founded by Mercuriadis in 2017.
The legal claims adds to troubles at Hipgnosis, which is undertaking a strategic review after its shareholders in October voted against its current structure and plans to sell a chunk of its music catalogues, prompting a reorganisation or wind-up within six months.
Mercuriadis, 60, a music industry veteran who has managed the likes of Elton John, Beyonce, Iron Maiden and Guns N' Roses, floated Hipgnosis Songs on the London Stock Exchange in 2018 in a bid to offer investors pure-play songs and music rights.
Mercuriadis, HSM and the London-listed fund deny HML's claims and intend to defend themselves, the fund said, adding that it was not insured as to the cost of dealing with the claim.
Reuters could not immediately reach Hipgnosis Music Limited for comment. Its liquidators did not immediately respond to calls from Reuters.
Hipgnosis Music Limited also alleged that Hipgnosis Songs "unlawfully assisted Mr Mercuriadis with, or received, this alleged diversion", the fund said. Hipgnosis Songs declined to provide further details.
HML was incorporated in 2015, with Mercuriadis and Afram Gergeo as directors. Mercuriadis, as creditor, filed a petition in 2017 to the court to wind up HML, according to regulatory filings.
Hipgnosis Songs owns songs such as "Shape of You" by Ed Sheeran and the rights to catalogues of several artists including Shakira, Neil Young and Red Hot Chili Peppers.
On Thursday, the London-listed fund said it plans to appoint independent advisers to conduct due diligence on the company's assets.
It has also asked for HSM to propose alternative terms for their future investment advisory arrangements, it said.