Music mogul Merck Mercuriadis could be facing a legal battle with liquidators over a failed investment company set up prior to his song royalty investment trust Hipgnosis Songs Fund (SONG ).

The former manager of Elton John, Beyonce, and Guns ‘N’ Roses may be taken to court over a failed business that he set up before launching his £965m royalties fund in 2018 which owns the back catalogues of artists such as Red Hot Chilli Peppers, Kaiser Chief, Neil Young and Shakira.

Mercuriadis faces a challenge from liquidators of his collapsed former business Hipgnosis Music, an artist management business, over the alleged breach of his fiduciary duty, which went bust owing nearly £4m, the Telegraph reported at the weekend. No further details are provided on what Mercuriadis is alleged to have done wrong.

Quantuma, the liquidators of the group, said following an initial assessment there were matters that ‘merited further investigation’.

In wind-up documents filed to Companies House discussing the possibility of recovering any money for creditors, Quantama representatives said: ‘The initial assessment revealed matters that the joint liquidators considered merited further investigation.

‘These matters are currently being explored and investigated with assistance from our appointed solicitors. It should be noted that while these matters are being investigated, there is material uncertainty as to the value of any claims.’

The list of creditors include three unsecured creditors with an estimated total liability of £332,235 and two claims totalling a further £3.6m.

Mercuriadis was listed as a director of Hipgnosis Music alongside businessman Afram Gergeo, who was sentenced to nine months of prison in his native Sweden in 2021 for his part in an elaborate scam that defrauded a Maltese pension scheme out of nearly €250,000 of savers’ money.

The pair also worked together as directors on the now-defunct Hipgnosis Copyrights Plc, a sound recording and music publishing business, that was wound up last year and is under the control of Quantama, which was appointed in January. Mercuriadis terminated his directorship in October 2022.

Hipgnosis Song Fund declined to comment.

The challenge by Quantama is not the only legal wrangling faced by Mercuridias as the fund is among the music publishers suing Twitter over ‘massive’ copyright infringement. The National Music Publishers’ Association is seeking $250m of damages on behalf of 17 companies, including Sony Music Group and Universal Music Publishing Group, for ‘hundreds of thousands of noticed infringements of approximately 1,700 works’.

The fund faces a continuation vote at its September annual general meeting, where shareholders are likely to want reassurance about what the manager plans to do about the 42% discount. While shares in the trust are down 20% over a three-year period, the net asset value has grown 58.5%.