DISSIDENT SHAREHOLDERS of investment group One51 have raised further question about controversial tax-free royalty payments to executives.

Shareholders are due to hear an explanation for the payments from the company when they gather for its annual general meeting in Dublin today.

Last night the dissidents claimed to have uncovered that the €4.96 million tax-free payment was made on foot of a patent that had not yet been granted.

Patent lawyers hired by the shareholders had established that the first patent – for a type of paint tin lid – was granted on August 6th, 2008.

This was some six weeks after the related payment was made to a series of companies before being paid out to unidentified executives.

Former One51 executive Gerry Killen, who is the unofficial leader of the “campaign for change at One51”, claimed the decision to make the payment before the patent was received was unusual, given the scale of the payment and the quality of the patent and raised questions about its true purpose.

“It is highly questionable as to how this valuation was arrived at, where there was no demonstrable revenue stream for the patented product,” Mr Killen said.

“Given the scope of the patent was very limited, with hundreds of similar competing patented technologies in Europe, and the fact that it related to a simple mechanical technology, we have been advised by a patent and trademark attorney, that typical royalties for patents of this kind would be in the region of 1-2 per cent.

“It appears incredible that the company could claim that this value would have been paid at arm’s length by an unrelated party, as required under the relevant legislation.”

Mr Killen said there appeared to be “no commercial motive for this value, other than the ulterior motive to allow a small number of executives to benefit from what is effectively the maximum threshold allowable under the tax-free patent income scheme (namely €5 million)”.

He said the group awaited the company’s explanation as to how the value was arrived at.

A One51 spokesman said the companies advisers KPMG and LK Shields had reviewed the transaction.

He said that the key issue was that the filing date of the patent was December 20th, 2007, and that patent, once granted, was in force for 10 years from that date.

The latest allegations came on the eve of what is expected to be a difficult meeting for chief executive Philip Lynch, who will be under pressure to explain the purpose of the scheme which was not disclosed to shareholders.

The dissident shareholders are seeking the election of three directors to the board of the company, which they claim has lost its way under Mr Lynch.

They are seeking the election of Mr Killen along with former Beamish Crawford chief Alf Smiddy and ex-Ibec director of European affairs Peter Brennan.

The shareholders have submitted a series of question to the board about the payments which relate to a patent held by a subsidiary called Protech Performance Ltd.

The payments were routed through a series of companies and 40 per cent of the €4.96 million was paid to up to nine individuals in the company.

The shareholders group wants the company to disclose the identity of the recipients.

It is also seeking an explanation for the use of an elaborate chain of companies and the whereabouts of the remainder of the €4.96 million.