Lee Soo Man Granted An Injunction To Ban SM Entertainment From Issuing Shares And Bonds — Here’s The Full Statement From His Law Firm
Back in February, HYBE became the largest shareholder in SM Entertainment after it acquired shares of the company being sold by founder Lee Soo Man. Amidst the decision, SM Entertainment management shared their opposition to the so-called “Hostile Deal.”
Before HYBE’s purchase of shares, it was announced that SM Entertainment had sold stocks to Kakao.
Lee Soo Man’s lawyers believed that SM Entertainment had used illegal methods to make shares available for Kakao to purchase and, in a startling announcement, threatened to file an injunction to block the sale.
Lee Soo Man Is Going To Sue SM Entertainment For Illegal Business
In a new statement, it was confirmed that the Seoul Eastern District Court had granted a petition for an injunction by Lee Soo Man, which banned the company from issuing new shares and convertible bonds.
All the quotes come from an official press release by the law firm Yoon & Yang, and it was already translated into English. In the statement, Lee Soo Man’s legal representatives praised the decision, explaining that what was fair and just.
It clearly confirmed that the resolution by SM’s current management to issue new shares and convertible bonds was made in an unlawful attempt to influence the company’s control and governance.
— Yoon & Yang
Yoon & Yang commented on the decision, revealing that they believed SM was not in the place to raise the funds that were needed to create an alliance with Kakao, which was rumored before HYBE’s purchase of the stocks.
Further, it opined that at the stage of merely drawing up a business strategy for the strategic alliance with Kakao, SM was not in a situation to raise funds worth around KRW 217.2 billion by issuing new shares and convertible bonds to Kakao in disregard of the preemptive rights of the existing shareholders. The Court also emphasized that when confronted with the imminent possibility of a dispute over management rights, the resolution by SM’s current management to issue new shares, etc. appears to have stemmed from their intent to weaken the largest shareholder’s control by increasing Kakao’s shares.
— Yoon & Yang
The Court also believed that, by Lee Soo Man still being a 3.65% shareholder, he has a legitimate need to file for an injunction.
The preemptive right is given to each of the shareholders, and thus any individual shareholder, regardless of the number of shares held or voting rights, may independently file for an injunction against the issuance of new shares and convertible bonds.
— Yoon & Yang
At the end of the statement, the court also confirmed that the activities by SM Entertainments managed to influence the control of the company were “unlawful.” They then added that if anything further was done by the management, they would take appropriate legal action.
The Court’s decision clearly confirmed that the resolution by SM’s current management to arbitrarily influence the control and governance of the company is deemed unlawful under the Korean Commercial Code. If SM’s current management further attempts to commit unlawful acts in the future, we will respond firmly by taking appropriate legal actions.
— Yoon & Yang
With HYBE firmly committed to working with SM Entertainment, the win for Lee Soo Man seemingly makes this more likely and confirms that he still has influence in the company.
You can read the initial news on the injunction below.
Lee Soo Man Is Going To Sue SM Entertainment For Illegal Business
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