Lee Soo Man Says It’s Illegal To Issue New Shares To Kakao+ Pledges To Take Legal Action
SM’s major shareholder Lee Soo Man said the SM board’s decision to issue new shares and convertible bonds to Kakao is illegal and will take legal action against it.
On February 7, Hwa Woo, a law firm, the legal representative of major shareholder Lee Soo Man, argued that it is illegal to issue new shares or convertible bonds to a third party for the purpose of changing the management’s influence on the company’s control, and vowed to take legal actions against SM for it.
The SM board of directors held an emergency board meeting earlier in the day to decide to issue new shares worth about 111.9 billion won ($88,000,000) and convertible bonds worth 105.2 billion won ($83,000,000) to a third party, with their new shares and convertible bonds allocated to Kakao account for about 9.05% of the total number of SM-generated shares.
In response, the legal representative of Lee Soo Man pointed out what he alleges to be SM’s illegal moves, saying,
SM is currently in a situation where a management dispute between its largest shareholder, general producer Lee Soo Man, and All-Line Partners, who advocate a shareholder activist fund, has intensified the management dispute against the largest shareholder as SM’s co-CEO Lee Sung Soo and Tak Young Joon agreed to All-Line Partners’s proposal without consulting with the largest shareholder.
It is illegal to issue new shares or convertible bonds to a third party for the purpose of changing the management’s influence on the company’s control, such as defending management rights or control in a company’s management dispute, which has been clearly confirmed by numerous courts, including the Supreme Court.
SM’s board of directors’ purpose of financing is only a superficial reason to appear to conform to the commercial law and articles of association, and in fact, it is an illegal act mainly aimed at changing the company’s control, such as defending management rights or control.
As an agent of the largest shareholder, we will fundamentally block the SM board’s illegal attempts through an injunction banning the issuance of illegal new shares and convertible bonds, and we will hold all civil and criminal liability for directors who voted for the illegal resolution.”
Earlier, it was reported that Kakao has become the largest shareholder of SM Entertainment.
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