Medicann touted plans to develop and commercialise medical cannabis when seeking two million dollars private investment capital in 2018. In the High Court twelve months later, co-founder Ross Smith said his plans were for a quick ‘pump and dump’ operation, getting out quickly with a few million in his pocket. Now he has been shut out by a court ruling over entitlement to a projected $152,000, all that is left on Medicann’s liquidation.
An information memorandum made available to potential Medicann investors described Mr Smith as a ‘cannabis visionary’ and a ‘global cannabis consultant.’ About $1.5 million was raised from outside investors. He was credited with a twenty per cent shareholding in Medicann.
The High Court was told of subsequent disagreement between Mr Smith and Medicann’s chief executive officer Brendon Ogilvy over Medicann’s strategic objectives. Smith told the High Court he viewed himself as an investment banker, putting together early stage companies, then getting out; making his millions tax free, he said.
Attempts to settle differences through mediation came to nothing. Medicann management then chopped Mr Smith’s holding from the share register, leaving him with no equity interest in Medicann and no entitlement to share in the $152,000 expected to remain on current liquidation of Medicann.
Associate judge Andrew ruled Medicann management was justified in removing him from the share register. Documents created on the formation of Medicann required shareholders to sign a subscription and shareholders agreement within one month of their share issue; a provision designed to keep Medicann under tight control. Mr Smith and interests associated with him never signed. Their shareholding was void, Judge Andrew ruled.
Mr Smith cried foul, claiming to be dyslexic and unaware of the company’s legal requirements. Mr Smith had a far greater awareness and understanding of the company’s requirements than he was prepared to acknowledge, Judge Andrew said.
re Medicann NZ Holdings Ltd – High Court (31.07.20)
20.131