What Are the Legal Arguments for MLSP and Oasis Pharmaceuticals?

Question from Sangeet, What Are the Legal Arguments for MLSP and Oasis Pharmaceuticals?

Answer from AI:

In the dispute between Oasis Pharmaceuticals and MLSP, both parties present strong legal arguments based on the terms of their partnership agreement, the Companies Act, and other relevant legal frameworks. Understanding these arguments requires a look at the key issues: the share forfeiture, the validity of the share call notice, and the conditions tied to the investment drawdowns.

Arguments for MLSP (Respondent)

• Condition Precedent for Investment: MLSP argues that the third drawdown of the investment was contingent upon the company achieving an EBITDA of NPR 300 million. Since this specific condition was not met, MLSP contends that their refusal to release the funds was justified.
• Validity of Share Call Notice: MLSP disputes the validity of the share call notice, claiming it lacked proper approval from the board of directors, which is a requirement under the company’s Memorandum of Association (MOA) and Shareholder Agreement (SHA).
• Share Forfeiture: MLSP challenges the forfeiture of their shares by the Managing Director, arguing it was done without full board approval and thus breaches the governance protocols established in the Companies Act and the internal agreements of the company.

Arguments for Oasis Pharmaceuticals (Plaintiff)

• Achievement of EBITDA Target: Oasis Pharmaceuticals argues that despite not meeting the NPR 300 million EBITDA target exactly, they came very close and achieved substantial EBITDA, which should be considered as fulfilling the condition due to extraordinary circumstances (COVID-19).
• Conflict of Interest: The company claims that the MLSP-appointed directors had a conflict of interest, which justifies the Managing Director’s decision to proceed with the share forfeiture without waiting for full board approval.
• Upholding Shareholder Rights: The founding shareholders argue that the actions taken were in defense of the company’s and its original shareholders’ rights, aiming to prevent MLSP from potentially leveraging its majority position to the detriment of the company’s long-term interests.

Legal Considerations and Recommendations

Both parties should prepare to address several legal considerations:

1. Interpretation of Contracts: The court will need to interpret the MOA, SSA, and any other relevant contracts to determine the intent of the parties and the applicability of the clauses in question.
2. Corporate Governance: Issues of corporate governance and the authority of directors and officers to make unilateral decisions will be central to the dispute.
3. Impact of External Circumstances: The effect of external circumstances like the COVID-19 pandemic on contractual obligations may also be considered, particularly in relation to the performance targets.

Given the complexity of these issues, both parties are advised to consult with legal professionals who specialize in corporate law and contract disputes. Legal counsel will be crucial in navigating the intricacies of the case and in formulating arguments that align with the prevailing legal standards.

For further reading on corporate governance and shareholder rights, you might consider reviewing resources such as the U.S. Securities and Exchange Commission’s guidelines on corporate governance.

Note: This overview provides a general outline of potential arguments and is not a substitute for professional legal advice.