If a judge doesn’t grant the orders requested, Lush wants a court order that “it is fair and equitable to liquidate and dissolve Lush Canada” – a profitable business with declining but substantial sales.
Lush Canada’s sales fell nearly 10.9% to $ 278.7 million in 2019, from $ 312.7 million two years earlier, Lush said in his petition. Profits plunged more than 73.4% to $ 15.9 million in 2019, from $ 59.9 million in 2017, the petition says.
The dispute between Wolverton and Lush Canada’s parent company comes nearly 25 years after Wolverton, his wife Karen Delaney-Wolverton and a few other partners opened Lush’s first store outside the UK, on Denman Street in Vancouver.
The Wolvertons, in partnership with Lush, and through a separate company, then opened Lush’s first US store in San Francisco in 2003. The Wolvertons then oversaw Lush’s expansion to 53 stores in Canada and 215 stores in the United States.
The UK-based parent company has also done well with other partners, as it has expanded the Lush brand to 48 countries and 900 stores.
A broken relationship between Lush and Mark Wolverton, however, came to light in a July 7 lawsuit that Lush filed in Las Vegas. Lush alleged Wolverton’s financial mismanagement while overseeing Lush’s US and Canadian operations, and accused him of funneling money from Lush’s US operations to Lush Canada.
Lush also alleged that Wolverton would not let a US director see the company’s US financial records because the operations were intertwined with those in Canada and she was not a director in Canada.
Wolverton denies Lush’s claims and claims there was a long-standing cost-sharing agreement between Lush’s US and Canadian companies.
“In Canada, Mr. Wolverton has rejected Lush’s brand decisions and his contribution to corporate decisions. Mr. Wolverton’s model of conduct and behavior demonstrates his intention to exclude Lush from the business and exclude Lush Canada from the benefits of Lush’s global brand and expertise, ”Lush said in his request to the Supreme Court of British Columbia.
Lush wants court to issue order stating that Lush Canada’s board of directors does not have the necessary quorum and that directors and shareholders are “deadlocked”, which entitles him to a remedy under of the Province’s Business Corporations Act.
The board paralysis is so severe that necessary tasks, such as appointing a new chief financial officer, are impossible because a shareholders’ agreement stipulates that board approval is required, according to the petition.
Lush claims Wolverton made the directors agree to grant him “broad power” to control Lush Canada’s operations. Lush basically wants a judge to overturn that vote.
Lush says he made several attempts to successfully appoint a qualified director to the board, but each time Wolverton refused to accept the appointment.
Wolverton’s suggestions for a director were white males, which Lush didn’t want because he wanted the board to have a diverse makeup, according to the petition.
If the court does not order a solution to the board’s deadlock, Lush said he wanted the court to either order Wolverton removed from the board, or Lush to be able to buy all of them. Wolverton’s shares in Lush Canada or that Lush Canada be dissolved. .
“I strongly deny the allegations made against me in the recently filed petition by Lush UK. The issues raised in this case relate to an internal and ongoing shareholder dispute, and not to the health or viability of our business. I remain committed to North American business, our passionate employees and our loyal customers, ”Wolverton said.