Dispute over China-focused baby-milk formula company settled

A High Court dispute between businessmen over a company set up to sell baby-milk formula to China has been resolved.

BM Formula Ltd was set up in August 2013 to exploit the US$12 billion powdered baby-milk market.

A key factor in the company’s success was that its product passed stringent regulatory standards brought in after the melamine-tainted formula scandal shook China in 2008.

Last November, two shareholders of BM Formula Ltd obtained orders restraining two other shareholders over alleged wrongful conduct, including allegedly trying to sell the product through a Hong Kong registered company.

The claims were denied.

Paschal Bergin and Sean Bradshaw, shareholders in BM Formula Ltd and their, company Holtal Ltd, petitioned the court under the Companies Act for an injunction restraining alleged oppressive conduct by fellow shareholders in BM Formula Ltd, Patrick Flanagan and Frans de Ru.

The High Court granted injunctions restraining Mr Flanagan and Mr de Ru from marketing, dealing in, selling, or promoting the company’s baby-milk formula. They were also restrained from dealing in, selling, charging any shares in the firm or from taking any steps to alienate any interest in the formula.

Agreement

Mr Bergin, following a direction from the court, subsequently lodged a €1 million bond to meet any judgment for damages in the case.

Gabriel Gavigan SC, with barrister Michael Vallely for the petitioners, told Ms Justice Deirdre Murphy the parties had reached an agreement.

As part of the agreement, the judge consented to make a permanent order restraining the respondents marketing, dealing in, promoting or selling any baby-milk formula known as BMP.

It was also agreed the €1 million bond lodged with the court be paid out. Out of that sum, €350,000 is to be paid to each of the defendants for their shares in the company. An additional €50,000 was to be paid to another individual, who was not involved in the case, in lieu of their shareholding.

The remaining €250,000 is to be paid to solicitors acting for Mr Gavigan’s clients. Counsel said all previous orders granted by the courts could be vacated and the proceedings struck out with liberty to apply.

In their proceedings, Mr Bergin and Mr Bradshaw claimed Mr Flanagan and Mr de Ru entered into an unlawful arrangement to plunder the assets of the company. The defendant’s lawyers denied this and claimed the petitioners set up a cloned company in order to hive off the assets of the firm, which, it was claimed, the defendants would not derive any benefit from.