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.”
