litigation

Although the SM acquisition battle between Hive and Kakao has concluded, the Financial Supervisory Service is known to continue to investigate violations of the Capital Markets Act, such as market price manipulation related to the mass purchase of SM stocks.

Financial Supervisory Service (President Lee Bok-hyeon)announced on the 17th that it would continue to investigate the situation related to market manipulation of SM stock raised by Hive regardless of Hive’s suspension of the SM acquisition process. An official from the Financial Supervisory Service said on the same day, “We will continue the investigation regardless of the management situation of SM.”

The Financial Supervisory Service is investigating the connection between the entity that accumulated the bulk of SM stocks and Kakao, and whether Kakao violated its disclosure obligations. If it is judged that there is suspicion as a result of the FSS investigation, the agenda is presented to the Securities and Futures Commission of the Financial Services Commission or skipped and the case is directly transferred to the prosecution. Regarding this, the Financial Supervisory Service is in a position that it is not yet at the stage of discussing the transfer.

Previously, on the 28th of last month, Hive submitted a petition to the Financial Supervisory Service requesting an investigation, claiming that there was interference with the tender offer due to the large purchase of SM shares by other corporations in the process of conducting the tender offer to secure management rights of SM. The investigation by the Financial Supervisory Service is likely to focus on whether there was an intention to obstruct the tender offer in such a large-scale buying act.

Meanwhile, as the agreement between Kakao and Hive is reached, there is a prospect that Hive may withdraw the complaint from the Financial Supervisory Service. Hive announced on the 12th that it would stop the SM acquisition process. A lawyer from a large law firm explained, “Hive will be able to consider withdrawing the petition if Kakao fulfills the terms of the agreement.”

However, even if Hive withdraws the complaint from the Financial Supervisory Service, the Financial Supervisory Service is expected to continue the investigation. An official from the Financial Supervisory Service said, “Hive did not express its intention to withdraw the petition. Even if it is withdrawn, it has nothing to do with the investigation,” he said. He said, “We are investigating whether there are any charges that should be handed over to investigative agencies regardless of the management agreement.”

Reporters Park Seon-jeong and Lim Hyun-kyung sjpark·hylim@

The mother and younger sisters of LG Group Chairman Koo Kwang-mo filed a lawsuit for inheritance recovery against Chairman Koo, saying, “Let’s divide the inheritance left by the late Chairman Koo Bon-moo.”

On February 28, Koo’s mother, Kim Young-sik, and her younger sister, Koo Yeon-kyung, CEO of LG Welfare Foundation, and Koo Yeon-soo, filed a lawsuit for inheritance recovery (2023 Gahap 31228) against Chairman Koo at the Seoul Western District Court. This case was assigned to the 11th Civil Division of the Seoul Western District Court (Presiding Judge Park Tae-il).

Kang Il-won (64, Judicial Research and Training Institute, 14th class), who served as a judge on the Constitutional Court, served as the plaintiff’s representative. Bae In-goo (55th, 25th class), a lawyer at Logos Law Firm, and lawyers Jo Young-wook and Seong Joo-kyung also represent the plaintiffs. Representative lawyer Kang Seok-hoon (60th, 19th class) of the law firm Yulchon, lawyer Kim Geun-jae, and lawyer Kim Seong-woo were appointed as the attorneys for the accused chairman Koo.

Chairman Koo was originally born as the son of Heesung Group Chairman Koo Bon-neung, but was adopted as the adopted son of his eldest father, Chairman Koo Bon-moo. Kim and his two daughters, the spouse of former chairman Koo Bon-moo, are known to insist that inheritance be made according to the statutory inheritance ratio. The plaintiffs, including Mr. Kim, said, “The filing of this lawsuit is not a management dispute, but rather to correct the procedural problems that occurred in the inheritance process for family harmony.” Article 999 of the Civil Act stipulates that, when the right of inheritance is infringed by a person who has the false right to inherit, the person having the right to inherit or his/her legal representative may file an action for restoration of inheritance.

In a statement on the 10th, LG said, “It has been more than 4 years since the inheritance of property was legally completed through several family discussions for 5 months after the death of the former president, and the 3 years of the exclusion period have already passed.” 11.28% of LG Co., Ltd. shares, totaling KRW 2 trillion, Chairman Koo and four heirs negotiated several times to inherit LG Co., Ltd. and other property related to management rights, and Mr. Kim and his two younger sisters inherited some of LG Co., Ltd. stocks We agreed to receive a legacy of 500 billion won, including real estate, the personal property of the chairman.”

“All shares in LG Co., Ltd., which are properties related to management rights, had to be inherited by Chairman Koo, but Chairman Koo accepted the request of three other heirs, and his younger sister, CEO Koo and Mr. Koo, each owned a 2.01% stake in LG Corp. , 0.51% (approximately 83 billion won at the time),” he said. I have made five payments so far using the annual installment payment system, and I plan to pay the last inheritance tax at the end of this year.” Their inheritance tax totaled 990 billion won.

As the agenda for SM Entertainment’s shareholders’ meeting was announced and the first court battle began, the dispute over SM’s management rights is intensifying.

When SM Entertainment announced the agenda for the shareholders’ meeting to be held in March on the 22nd, the current SM board of directors and the directors recommended by former executive producer Lee Soo-man were all disclosed.

The SM board of directors recommended Cheol-hyeok Jang, CFO of SM, Ji-won Kim, head of SM Marketing Center, and Jung-min Choi, head of SM Global Business Center, as candidates for inside director positions. On the 15th, former general manager Lee proposed Jae-sang Lee, CEO of Hive America, Jin-soo Jeong (55, 23rd class of Judicial Research and Training Institute), CLO (Chief Legal Officer) of Hive, and Jin-hwa Lee, head of the Business Planning Office at Hive, as inside director candidates.

On the other hand, the interrogation date for the application for injunction to prohibit the issuance of new shares and convertible bonds (2023 Kahap 10034) filed by former general manager Lee against SM Entertainment regarding the new shares and convertible bonds that SM decided to allocate to Kakao was on the 22nd in Munjeong-dong, Songpa-gu, Seoul. The first court battle also took place as it was held at the district court.

Law firm Hwawoo (representative lawyer Jeong Jin-soo), who is the representative of Lee’s former general manager, argued that the allocation of new stocks and convertible bonds to Kakao by SM’s current management was an attempt to exclude former general manager Lee, who was the largest shareholder, from management rights. On the other hand, Lee & Ko (representative lawyer Kim Sang-gon), representing SM, argued that it was not a management dispute, but a conflict of opinions on management judgment.

Hive and the current SM management are fighting public opinion outside the court ahead of the shareholders’ meeting in March. As the contents of the business cooperation contract originally signed when SM and Kakao signed a contract to acquire new stocks and convertible bonds were revealed, Hive issued a statement on the 24th and said, “The main contents of the business cooperation contract are SM’s claims of ‘horizontal cooperation with Kakao. It is difficult to see it as a ‘relationship’,” he said. “We will take all necessary civil and criminal legal measures.”

In the business cooperation contract, △SM recommends a person nominated by Kakao Entertainment as a candidate for other non-executive directors at the regular shareholders’ meeting, and separately appoints another person nominated by Kakao Entertainment as an unregistered SM executive △SM’s domestic music and music sources Signed a contract giving exclusive rights to Kakao Entertainment for distribution △ It contains contents such as cooperating with Kakao Entertainment to distribute SM’s overseas albums and music sources, and distribution of tickets for domestic performances and fan meetings.

On the same day, through a statement, SM refuted, saying, “SM and Kakao have a strategic cooperative relationship to create horizontal synergy and a virtuous cycle.” “The future value of SM is threatened by Hive’s hostile M&A.”

SM issued a correct disclosure on the decision to increase capital and said, “Kakao (according to the business cooperation contract and convertible bond contract) has the priority acquisition negotiation right when issuing a third party allocation and other non-executive directors to be appointed at the 28th regular shareholders’ meeting. We have the right to recommend candidates.”

On the other hand, in the stock purchase contract between Hive and the former general manager, it is known that a clause was inserted in which Hive provided 1 billion won annually to the former general manager for 10 years, and the former general manager used this amount in the name of ESG.

Regarding this, a Hive official said, “This cooperation will be carried out after detailed mutual discussions (with the former general manager) in advance on the details and scope of ESG activities.” It will be a way to directly support.”