Lee Soo Man, the founder of SM Entertainment, is threatening legal action against SM Entertainment regarding the company’s new relationship with Kakao.
In a statement shared by legal firm Hwawoo, which represents Lee Soo Man, they stated that SM Entertainment and Kakao used illegal methods to provide Kakao with the shares necessary.
As it has been reported through the media, SM Entertainment is currently in a situation where there is a management dispute between its largest shareholder, Lee Soo Man, and Align Partners, which is a shareholder activist fund. Align Partners made a series of proposals to appoint an auditor for SM Entertainment’s regular shareholder meetings last year and since then, there have been various disputes over management rights made against Lee Soo Man, such as requesting access to accounting books and board meeting notes.
On January 20 of this year, SM Entertainment’s co-CEOs Lee Sung Soo and Tak Young Joon agreed to Align Partners’ proposal without consulting Lee Soo Man, the largest shareholder in the company. This action thus further increased the tension and management disputes between the company and the largest shareholder, Lee Soo Man.
It is clearly a violation of commercial law and the articles associated with the law for SM Entertainment’s board of directors, which is led by the co-CEOs, to issue new shares and convertible bonds to third parties at a time when there is such a dispute within the company.
SM Entertainment’s board of directors unilaterally distributed new shares and convertible bonds to the third party (Kakao) in order to expand their reach and make things more favorable to them as they attempted to secure a competitive edge in controlling the direction of the company. As the legal firm of the largest shareholder, we will block SM Entertainment’s board of directors’ attempts at this through an injunction, banning the issuance of new shares and convertible bonds and we will hold the directors responsible for this both civilly and criminally liable.
— Hwawoo
Earlier, it was announced that Kakao had acquired a 9.05% stake in SM Entertainment, becoming the company’s second largest shareholder. Lee Soo Man remained the company’s top shareholder with 18.5% stake in the company.
Kakao Secures 9.05% Stake In SM Entertainment And Becomes Second Largest Shareholder
