Last week WPP sent a letter to Sorrell accusing him of breaching his contract and said that it would block payment of £20 million of shares that it allowed him to keep when he left the firm.
The letter claims that Sorrell used information about one of WPP’s takeover targets, which he obtained from his time at the firm, to acquire it himself.
However friends of Sorrell said that he “vehemently denies” WPP’s breach of contract claim.
They add that he will fight any attempt to deny him the £20 million he is due from two of the firm’s bonus schemes – the executive performance plan and the restricted stock plan – as he was classed as a “good leaver” when he left the firm.
The advertising giant and Sorrell are vying to take control of highly coveted Dutch digital production agency MediaMonks, which could fetch up to Eur300 million (£265 million).
It is understood that front runner Sorrell, who met MediaMonks executives last week, could seal the deal within days.
MediaMonks has offices in 10 different countries and produces digital advertising campaigns, such as games, websites and films, for the likes of Audi and Lego.
It was founded in 2001 and employs 750.
If successful, the MediaMonks deal would be the first from Sorrell since he left WPP in acrimonious circumstances in April, amid allegations of financial misconduct, which he denies.
WPP, which he founded over 30 years ago, has been criticised by investors for refusing to disclose the reasons behind his departure.
Sorrell’s S4 Capital comeback vehicle is looking at a number of acquisition targets and it could raise up to approximately £1 billion from issuing new shares to investors to finance those deals.
In May the shell company Derriston Capital, which is listed on the London Stock Exchange, announced that it is being acquired by S4 in a reverse takeover.
The deal is scheduled to close later this month and will give S4 a stock exchange listing and with it, the ability to issue shares to fund deals.
S4 has already raised £51 million and has pledges of cash from investors for a further £150 million.
Its supporters include star hedge fund manager Crispin Odey and financier Lord Rothschild. Sorrell is looking to build what he has described as a “next generation” advertising business by using S4 to acquire digital businesses.
It is a similar strategy to the one he used to turn WPP from an empty shell into the world’s largest advertising group. Prior to his interest in MediaMonks emerging, Sorrell had described S4 as a “peanut” compared to the £16 billion WPP.