A person signed a termsheet for investing several hundred thousand Dollars in a technology company which stated that no sanction will be held if not all of the amount will be invested. Later the investor signed another termsheet that cancelled the first and the amount of investment was raised to millions, but failed to invest the full amount and the company sued only for the amounts due under the first agreement. Among other arguments the investor contended that the agreement is illegal because of a provision stating that the director he appoints will be an agent of one of the other shareholders.
The Court held that once an amended termsheet was signed which cancelled the first one, the waiver of sanctions provision was cancelled.
As to the provision stating that the director is an agent of a shareholder it is indeed a provision that is against the independence of the discretion of the directors. However, it does not make the whole agreement illegal because is can be segregated from the rest of the agreement and cancelled by itself. Thus the Court held that the investor must pay the amount of the rest of the investment.