Former Revolution Beauty investor Chrysalis Investments has issued a draft claim of £45.2m after claiming the make-up brand deceived it.
The growth capital fund has accused Revolution Beauty of “deceit, negligent misstatement and/or misrepresentation” at the time of its company share purchase.
The firm bought a £45m stake in the affordable cosmetics company in July 2021.
It then sold its shares for £5.7m in 2022 after Revolution Beauty’s value collapsed – crystallising a huge loss.
Shares in Revolution Beauty were suspended in September 2022 after the company failed to publish its FY22 audited results.
An independent investigation by auditor BDO followed and uncovered a string of serious accounting and management failures.
This included data which showed co-founders Adam Minto and Tom Allsworth had made personal loans of around £1m to distributors and a senior employee.
Chrysalis Investments’ legal advisors have filed a claim of £39m against Revolution Beauty, plus a further claim of £6.2m for “consequential losses”.
The company said in a Stock Exchange notice on 22 April that “it has not been satisfied with the limited responses received from Revolution Beauty and its legal advisers to date.
“The company considers that it has a strong case and is willing to pursue it.”
Revolution Beauty “strongly contests” the allegations and said its legal advisers “continue to review the materials received on 19 April, and are considering its response.”
The make-up brand added it will “continue to engage” with Chrysalis Investments and its advisers, and will provide updates as appropriate.
Revolution Beauty has been shrouded by shareholder revolts and legal battles with Minto over the past year following the accounting scandal.
However, the embattled company recently raised its full-year guidance for 2024 as its recovery plan starts to pay off.
The aim is to hit £1bn in sales by 2030 as part of this “revival” strategy.