Chrysalis Investments (CHRY ) has filed a legal claim for more than £45m against make-up company Revolution Beauty (REVB), which has in the past been dogged by questionable business deals and undisclosed loans.

The £471m growth capital investor has ratcheted up action against the AIM-listed company after it failed to provide satisfactory responses to a letter of claim issued in November 2023.

Chrysalis’ legal advisers have now issued a ‘draft particulars of claim’ for £39m and ‘a claim for consequential losses of a further £6.2m’, with ex-Jupiter managers Richard Watts and Nick Williamson buying a position in the company for £45m in July 2021, which they then finally sold in late 2022 for £5.7m, crystallising a 90% loss.

‘The company considers that it has a strong case and is willing to pursue it,’ they said in a stock exchange notice on Monday.

In its own notice, Revolution Beauty said it ‘strongly contests the allegations’ and ‘will continue to engage with Chrysalis and its advisers’.

In the fund’s February annual results, the managers confirmed they had given Revolution Beauty 28 days to respond to claims that information provided to the fund when it first bought shares ‘contained misstatements and material omissions’ and therefore the fund had a potential claim for ‘deceit, negligent misstatement, and/or misrepresentation’.

Shares in Beauty Revolution were suspended at the beginning of September 2022 after it failed to publish its audited results and an independent investigation was ordered that subsequently revealed dubious business dealings, undisclosed loans and unnecessary stockpiling of the inventory.

In February, Revolution Beauty reached a £2.9m settlement with co-founder and former chief executive Adam Minto who agreed to pay the amount to settle allegations that he breached his fiduciary duties. The settlement follows that agreed with former chair Tim Allsworth in December.

The matter with Minto – who was at the helm when the shares were suspended – was made with ‘no admission or acceptance of liability by either party’.

The decision by Chrysalis to pursue a multi-million pound claim saw shares in Revolution Beauty slide 10% to 27p at the beginning of the week, reversing some of the gains it had made over the past year as it battled to put its accounting issues behind it. The shares in the make-up group are up 13% over the past year but are still 83% lower than the 170p price at IPO.

Chrysalis’ shares softened 0.6% to 78p. Shares in the private equity fund trade on a hefty discount of 47% to asset value as a result of the 2022 growth selloff and concerns over the valuations of unlisted companies.

However, hopes that key stocks such as credit provider Klarna could float this year, combined with a commitment by Chrysalis to plough £100m of capital gains into share buybacks have helped the stock rally 49% since October.  

Activist Asset Value Investors has lifted its stake to over 8% confident the investment company is now focused on shareholder returns.