This article examines the challenges encountered by a health tech start-up in securing funding, resulting in a compensation ruling.
The company’s inability to fulfill payment obligations towards a software engineer, Mr Johansson, due to a lack of funds and failed funding attempts is explored.
Efforts to obtain grants and shareholder funding proved unsuccessful, as did engagement with UK consultants specializing in funding.
Furthermore, the impact of the Covid pandemic further hindered funding prospects, particularly with potential investors in the US.
Consequently, Mr Johansson was awarded €50,708.72 for unpaid wages, notice, and holiday entitlement. The compensation ruling cited the start-up’s financial constraints and violations of the Payments of Wages Act 1991 as justifications.
This case highlights the formidable challenges faced by health tech start-ups in navigating the funding process, particularly in the context of unforeseen global disruptions.
Funding Difficulties
The health tech start-up, CSIS Health Ltd, encountered significant challenges in securing funding for its business, resulting in the company’s inability to make payments owed to Mr Johansson and ultimately leading to the compensation ruling.
Despite multiple attempts to obtain grants or shareholder funding, the company was unsuccessful in its funding efforts.
The engagement of consultants in the UK for funding assistance also proved futile.
Moreover, the impact of Covid further hindered the company’s funding prospects, as potential investors in the US were affected by the pandemic, leading to a lack of investment opportunities.
As a result, the company had no funds available to pay the amounts due to Mr Johansson, which ultimately led to the breach of the Payments of Wages Act 1991.
These funding difficulties highlight the challenges faced by start-ups in securing the necessary financial resources to sustain their operations and meet their payment obligations.
Legal Breaches
Legal breaches were identified in the case, resulting in the adjudication officer’s decision to award compensation to Mr Johansson.
The breaches were related to the Payments of Wages Act 1991, specifically Section 5(6) of the Act. It was found that the wages sought by Mr Johansson were due and uncontested, and the company confirmed that the payments were owed but lacked the funds to pay them. The company’s inability to make the payments was attributed to the lack of funding.
Additionally, the contract of employment between Mr Johansson and the company was deemed to be breached, as the contract contained a three-month notice period which was not honored when the contract was terminated without notice.
As a result, Mr Johansson was awarded compensation for the non-payment of notice, amounting to €25,000 gross.
Impact of Covid
The impact of the Covid pandemic on potential investors and business opportunities significantly hindered the funding prospects of the start-up company.
The company’s efforts to secure funding and investments were greatly affected as potential investors in the US were unable to fulfill their promised investments due to the pandemic.
The disruption caused by Covid also led to a lack of business opportunities, further exacerbating the difficulties in obtaining funding.
The start-up’s confidence in securing funding and an EIC tech grant was shattered as the pandemic continued to unfold.
The lack of funding and investments directly attributed to the impact of Covid, ultimately resulting in the company’s inability to make payments owed to its software engineer.
This highlights the far-reaching consequences that the pandemic had on the financial stability and operations of the health tech start-up.
