Seniior Adv

vocate Khond dker Mahbub

M buddin n Ahmeed
Meemoriaal Moott Courtt Comp
petition
n

2019 COMPETITIION CA
ASE

BRAC Universsity
 Company Bench

High Court Division, Supreme Court of Bangladesh

Anika and Russel …………………………………………………Applicants

Kintech Private Limited and its Directors, ……………………Respondents

and Amazing Ventures Fund

1. The Republic of Kathal is a former colony of the British Empire, which gained its
independence in the year 1971. It is a developing country, having wide scope of
investment opportunities in various sectors. The Government of Kathal recognises and
continuously promotes investment opportunities in its different sectors especially IT, both
locally and internationally.

2. Due to fund-raising opportunities, available domestically and from abroad, there has been
a rise of various IT and other Tech start-ups in Kathal along with various incubator-
programmes that house them. The founders of these start-ups generally tend to be high
school and university students, who have very little training in running a business or the
legalities that come along with it. Since there is a high demand offunds, the start-up
investment environment is such, that it is an “Investor Driven Market”, that is the
investors dictate the terms of the investment.

3. Anika and Russel (hereinafter together referred to as the “Founder(s)”), two final year
students from the leading business institute in Kathal, came up with the idea of
developing a system which is designed to assist physiotherapy (“PT”) patients who are
advised to do specific exercises regularly, in order to improve their mobility (“Product”).
Their idea would allow PT patients to do such exercises from the comfort of their own
home, with the help of Kinect sensor technology. The system they would develop would
use Kinect sensors to allow PT patients to do their exercises using a game-based
interface. Patients can stand or sit in front of the Kinect sensor and the monitor, and
perform the exercises as shown. The sensors and monitor will track movements that are

-2-
 tailored to each patient’s therapeutic needs and would also determine whether the
exercises are being done accurately.

4. Since Anika and Russel lacked the funds to materialise their idea, in the year 2013, they
decided to incorporate a company called Kintech Private Limited (“Kintech”,
“Company”). Anika was appointed as the Chairman of the Company, and Russel as its
Managing Director. Kintech participated in a Government organised start-up exhibition
called “Funding the Future”, which was sponsored by world renowned Venture Capital
Funds looking to invest in upcoming business ventures in developing nations around the
world.

5. One such Venture Capital Fund registered in the Mauritius, called Amazing Ventures
Fund (“AVF”, “Investors”), looking to venture out into the health sector, showed an
interest in the idea and technology presented by Kintech. AVF convinced the Founders
that they were best equipped to assist them in scaling-up their company while protecting
their interest. AVF convinced the Founders that they were interested in Kintech for the
long-term, and that they would not interfere in the Founders’ running of the
Company.After months of negotiations, on August 25, 2012 AVF agreed to invest in
convertible preference shares (“CPS”) of Kintech for a cash consideration of BDT 30
Crores, and signed a Term Sheet in this regard. In the Term Sheet, it was mentioned that
the CPSwould be convertible into equity shares, after a certain period of time as agreed
by the Founders and Investors in the Subscription and Shareholder’s Agreement (“SSA”).

6. The Founders, not having the necessary legal knowledge on venture capital investments,
were concerned about protecting their interest in the Company. Although they were given
assurance by the Investor and Great Firm, a global law firm specialising in venture capital
investments, having its offices in Kathal.Great Firm, was a retained counsel of AVF, in
Mauritius as well, and handled AVF’s legal matters in different jurisdictions. Great
Firm’s Kathal office was hired as the counsel for the transaction, in order to protect the
interests of all the parties. It was also decided, that the fees of Great Firm would be paid
by Kintech, as the Founders were informed that it was the general practice in the industry.
The total legal fees including costs for the transaction was approximately BDT 30 Lacs.

7. The Founders, Anika and Russel, the Investor,AVF represented by Mr Fardeen Ahmed,
an investment analyst at AVF andKintech, the Company represented by Russel, the
Managing Director, executed the SSA on February 18, 2013, at the registered office of

-3-
 Kintech. Excerpts from the SSA have been attached as “ANNEXURE – A”.
Accordingly, the Articles of Association of the Company was amended in the EGM duly
called and held, to reflect the terms of the SSA. The Investor held the majority stake in
the Company.

8. With the new terms coming into effect, the constitution of the Board of Directors
(“BOD”), was altered. As agreed in the SSA, the Board now included, Anika, Russel, two
nominee directors of AVF, namely, Mr Fardeen Ahmed and Ms Aria, and Dr Raju Mia,
an experienced tech specialist in the health sector, who sat on various other boards of
Companies in which AVF has equity stake. Dr Mia’s nomination was approved by the
Founders and Investor. Mr Fardeen Ahmed was appointed as theManaging Director and
Dr Raju Mia, as the Chairman of the Company.

9. The fact that, Kintech, being a start-up, was able to raise such a huge sum of money in its
first round of fund raising, made the Company very popular among young coders and
game developers. Russel was successful in hiring a strong team of talented software
developers on lucrative remuneration packages, which was approved by the Board of
Directors. Kintech also moved to a bigger office space, at a commercial building in the
posh part of the capital city of Kathal.

10. AVF felt, that while the product was still in its development stage, they should start
creating publicity for it, by approaching physiotherapists in Kathal, so that they refer the
Product to their patients. For this purpose, in a Board Meeting on 16 August, 2013, AVF
forwarded the idea that Best Marketing Agency (“BMA”), a marketing agency and
publicist based in Mauritius, also a newly founded affiliate of AVF, should be hired to
assist Kintech in creating traction for their Product before its Launch. Anika and Russel
were firmly against the idea, since they thought that it would divert crucial funds which
could be used for the development of the Product, which should be the priority. However,
the majority of the directors, voted in favour of hiring BMA, at a fee of BDT 1 crore per
annum.

11. BMA began a marketing campaign across Kathal starting October 2013, advertising the
benefits and ease of use of the Product, but without the Product actually having been
developed, the campaign was slow to draw attention. In order to create further traction for
the Product prior to its launch in mid-2014, in January of 2014, BMA floated the idea,
that a popular celebrity figure, from Kathal, should be appointed as the Brand

-4-
 Ambassador of the Company, in order to create interest in the Product before its launch.
In a meeting of the Board on February 2, 2014, it was resolved that famous social media
celebrity SabaJaan, for a fee of BDT 1.5 crore, would be appointed as the Brand
Ambassador for a period of 1 year, on the advice of BMA. Anika and Russel were again
opposed to the idea but it was passed by the majority. The Founders felt that the Product
did not require a Brand Ambassador, and second that SabaJaan, was not the appropriate
person to be talking about the Product. As Anika and Russel had assumed, as soon as
marketing campaigns including SabaJaan for the Product were released on social media
in May of 2014, overnight the campaign became a joke.

12. For the day of the launch, that is October 14, 2014, BMA advised booking the Town hall,
and inviting all physiotherapists and chiropractors to organise a day long exhibition in the
capital city of Kathal, which would be open to the general public. The exhibition was
advertised on all national daily newspapers. In the exhibition, people would be allowed to
test the Products for themselves, and experience what it does first-hand. Substantial
expenses were made in order to organise the launch exhibition. The grand launch,
although created a lot of interest in the Product, it did not bring in many buyers.

13. Despite all of this marketing and publicity, business was slow and the Investor, based on
the data and analysis felt that there was significant scepticism about the business model,
the inexperienced management team and whether the Product could deliver on its
promises especially because of its high cost. While it was still early days for the
business, the Company was not even close to reaching the business and financial targets
set out in the SSA and the articles of association.

14. In the meanwhile, with huge expenses having been made to market the product before its
launch and to organise the launch exhibition, the funds received from AVF were quickly
drying up. In the Board Meeting, dated December 24, 2014, which was not attended by
Anika and Russel, it was clear to the Board that Kintech required further funding in order
to continue its operation. Mr Fardeen Ahmed, presented a financing plan, whereby,
Amazing Firm (“AF”, “New Investor”), registered as a private equity firm in the US, a
sister concern of AVF, would invest in equity shares of Kintech, for a consideration of 15
Crores. The Board unanimously approved the financing plan and decided to hire Great
Firm as the Transaction Counsel.

-5-
15. As advised by Great Firm, AF signed a deed of adherence on January 31, 2015, and
accepted and executed the terms of the SSA dated February 18, 2013. On the same day,
the nominee directors of AVF gave notice of a board meeting to be held at 10 am on
February 15, 2015 in the offices of Great Firm to allot and issue equity shares to the New
Investor. An EGM was also called on the same day and venue at 3 pm to amend the
articles of association and reconstitute the board of directors. Despite the founders'
protest, all resolutions were approved by a majority of the board of directors, and as a
result of new shares being allotted to AF, the Founders’ equity stake in the company was
reduced to 9 per cent each. In the EGM held that same afternoon, new articles of
association were adopted by the Company and Anika and Russel were removed from the
board. The articles of association allowed all decisions to be taken by a majority vote of
shareholders, and in case of a deadlock, by a poll. Anika and Russel did not attend the
EGM, in protest against the recent actions of the Investor.

16. On March 1, 2015, Legal Expert, a law firm instructed by Anika and Russel wrote to
Kintech and AVF, that the amendments to the articles of association and the removal of
the Founders from the board of directors was illegal. The letter also contained an offer by
the Founders to purchase all the securities of the Company owned by the Investors at a
fair market value. Legal proceedings were threatened if these actions were not
immediately reversed. On March 10, 2015, the Founders filed a petition before the
Company Bench of the High Court Division of Kathal, complaining of continuing acts of
illegality, prejudice and discrimination by Kintech and the majority shareholders.

17. The Company Bench has now listed all following issues connected with Kintech for final
hearing on all procedural and substantive issues:

i. Whether a case of prejudice and discrimination has been made out?

ii. Whether the amendment of the articles and removal of directors from the Board was
illegal?

-6-
 NOTE TO PARTICIPANTS

i. The laws of Kathal are identicalto the laws of Bangladesh. 



ii. All common law jurisprudence would have persuasive value in Kathal. 



iii. Issues relating to the jurisdiction to hear the application should not be raised. 


iv. All names and references to a person, entity or trade names used in the proposition are
fictitious and any resemblance to any existing persons, entities or trade names is purely

coincidental and unintentional. 


v. For the purposes of this moot proposition the position of law as on the date of release of
this moot proposition shall be applicable; 


-7-
 ANNEXURE – A

(Excerpts from the SSA dated February 13, 2013)

1. DEFINITIONS

“Agreement” shall mean this Subscription and Shareholders’ Agreement and all attached
Schedules dated February 18, 2013, executed and as varied, amended, supplemented or
modified from time to time;

“Board of Directors” means the Board of Directors of the Company constituted as per this
Agreementand references to “Board” shall be construed accordingly;

“Company” means Kintech Private Limited;

“Reserved Matters” shall have the same meaning as described in clause 6;

“Equity Stake”, and terms which denote the same or substantially similar meaning or which
otherwise refer to the “ownership” of or “shareholding” in the Company by any of the
Shareholder(s) means the Ordinary Shares and/or the CPS held by any of them, and when any
of the foregoing is referenced herein as a percentage, such percentage is computed for such
Shareholder(s) by taking the sum of all of the Ordinary Shares and CPS if any, held by such
Shareholder(s), and dividing such sum by the total number of Ordinary Shares and CPS held
by all of the Shareholders;

“Fair Market Value” means the fair value of the shares of the Company as determined by an
independent, reputed chartered accountant firm or licensed merchant banker selected by the
Board and as approved by the Investors;

“Founders” means Anika and Russel;

"Investors" means the any Person or Company, other than the Founders, who becomes a
party to this Agreement as an "Investor" by signing a deed of adherence with respect to this
Agreement;

"Investor Directors" means the directors appointed by the Investor in accordance with
clause 10;

-8-
"Resolutions" means the resolutions in agreed form (a) to be passed by the Company at a
duly convened general meeting or Board meeting, as applicable, or (b) Board resolutions in
writing and executed by circulation;

"Shares" or “Equity Shares” means collectively the CPS, Ordinary Shares and any other
securities issued by the Company from time to time that may provide an option for the
acquisition of or a right to a conversion to Shares;

“Shareholders” means the Existing Shareholders and the New Shareholders and any other
person holding Shares who shall have executed a Deed of Ratification and Accession
pursuant to the provisions of this Agreement, each a “Shareholder”;

6. RESERVED MATTERS:

6.1 The Shareholders and Directors of the Company shall use their respective powers to
ensure, so far as they are legally able, that no action or decision is taken (whether by
the Board of Directors, the Company or any of the employees of the Company) to
proceed with any of the matters specified in clause 6.2 below (“Reserved Matters”)
unless it is approved by the Investor, in any general meeting or extraordinary general
meeting, or Investor Director, in Board Meeting of the Company, as may be
prescribed by law.

6.2 The Reserved Matters are:

(a) Memorandum and Articles of Association: altering the Memorandum and/or

Articles of Association or other constitutional documents of the Company;

(b) changes in share capital: changing the authorized or issued share capital of the
Company including any reduction of capital;

(c) borrowings: the Company borrowing or raising money which would result in the
aggregate borrowing of the Company exceeding BDT 5,00,000 (Taka Five Lakhs)
or such other amounts as the Shareholders may agree from time to time;

(d) capital expenditure: the Company incurring any capital expenditure in respect of
any item or project in excess of BDT 1,00,000 (Taka One Lakhs) or such other
amounts as the Shareholders may agree from time to time;

(e) material contracts: the Company entering into any contract, liability or
commitment which could involve a liability for expenditure in excess of BDT

-9-
 1,00,000 (Taka One Lakh) or any other obligation of a material magnitude or
importance in the context of the Business;

(f) change, increase or decrease in the size of the Board of Directors: any change in
the directorship of the Company or any increase or decrease of the size of Board
of Directors;

8. VOTING RIGHTS AND MEETING

8.1. All Shares shall each have one vote per fully paid up Ordinary Share or CPS in a
meeting of the Company. 


8.2. As long Investors holds Equity Stake of 5% or more, at least one representative of the
respective Investor(s) will be present in any Shareholders meeting of the Company, in
order to constitute a valid quorum for any such meeting.

8.3. No Shareholders’ meeting shall be deemed to be validly held without quorum, as

provided in clause 8.2, being fulfilled.

8.4. For so long as an Investor holds Equity Stake of 10% or more, no business/
action/Resolution in relation to the Reserved Matters (as provided in Clause 6) shall
be deemed to be approved, taken or transacted unless the same has been approved by
at least one representative of such Investor.

10. THE BOARD AND THE INVESTOR DIRECTORS

10.1. The members of the Board immediately following the execution of this agreement
who shall comprise of 5 directors, (a) Anika, (b) Russel, (c) Investor shall have the
right to nominate 2 directors and (c) an experienced independent person approved by
the Founders and Investor, who would be chairman of the company.

10.2. The Founders and Investor will have a right to nominate at least one Director so long
as they or it holds Equity Stake of at least 10% and two Directors so long as they or it
holds Equity Stake of at least 20%. The independent person nominated to the Board
on approval of the Founders and the Investors need not hold any Equity Stake to sit
on the Board.

10.3. At least two directors should be present in order to form a valid quorum, provided that
so long as Investor has an Investor Director on the Board, at least one of the Investor
Directors will be required to be present in any Board or sub- committee as formed by

- 10 -
 the Board of the Company, in order to constitute valid quorum for any such meeting.
No Board meeting shall be held without this valid quorum.


10.4. Decisions in the Board meeting shall be approved on the basis of a simple majority by
a show of hands, subject to the provision of Clause 10.3.

10.5. As long as the Investors Equity Stake in the Company (on a fully diluted and on As
Converted Basis) is individually 10% or more, the Investors jointly (or if only one of
the Investors has a stake of 10% or more, then individually by such Investor) shall
have the right to increase their or its, as applicable, representation on the Board

13. DRAG-ALONG RIGHT

13.1. Drag-Along Right on the Founders can be enforced by the Investor, so long as the
Investor own more than 10% Equity Stake in the Company, at any time.

13.2. The Drag Along Right would require that, in the event the Investor proposes to
sell/transfer its Shares to any third-party purchaser, the Founders may be required, at
the sole discretion of the Investors, to sell/transfer all or a portion of their Shares to
the same third-party purchaser, at the same price and terms offered to the Investor.

20. COSTS

20.1 The cost of this transaction shall be borne by the Company including payment of all
stamp duties, fees and levies imposed by any applicable law, statutory or regulatory
authority in connection with the execution of this Agreement, the transactions
contemplated herein including the issuance, and registration with the RJSC, of the
New Shareholder Shares.

- 11 -