Lee Soo-man to sue SM Entertainment for violation of the agency's laws and regulations

On February 7, Lee Soo-man's legal representative, Hwawoo Legal Firm, released a statement explaining his stance on suing SM Entertainment for breaching business regulations. SM Entertainment recently signed a partnership contract with Kakao Entertainment, and it was only later revealed that the two labels took illegal measures to make Kakao the second largest shareholder of SM, coming up to 9.05% of their shares.

This was done without informing Lee Soo-man, who is not only the agency's founder but also its largest shareholder. The co-CEOs, Lee Sung-soo and Tak Young-joon took the agreement from Align Partners, who was next in line with Lee Soo-man as SM's largest stakeholder. Hwawoo stated,

"Align Partners made a series of proposals to appoint an auditor for SM Entertainment's regula shareholder meetings last year and since then, there has been various dispute ovver the management rights made against Lee Soo-man, as requesting access to accounting book and board meeting notes."

Previously, it was also revealed that there was a management dispute between Soo-man and Align Partners (a shareholder activist fund). Issues pertaining to new stocks and convertible bonds are considered illegal under such circumstances. This causes many disadvantages, decreases in shares, and lessens control of the company for the existing shareholders, which makes Soo-man's stance fair given his position.

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Netizens react to Lee Soo-man's stance to sue SM Entertainment, the very company he founded

Hwawoo's statement provides a clear explanation of the circumstances that led to Soo-man's stance. It reads,

"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 company's largest shareholder."

It continues,

"It's clearly illegal for SM Entertainment's board of directors, which is led by the co-CEO's, to issue new shares and convertible bonds to third parties at a time when there's a dispute with in the company."

As SM unilaterally distributed new shares and convertible bonds to Kakao, it did so for reasons that appear to be illegal.

"(They signed with Kakao) in order to expand their reach and make things more favourable to them and they attempted to secure a competitive edge in contolling the direction of the company."

Upon realizing SM Entertainment's illegal actions, Lee Soo-man is set to sue the company and take legal action against it and its employees who were engaged in the same.

"We will block SM Entetainment's board of directors' attempt at this through an injunction, banning the issuance of new shares and convertible bonfs ans we will hold the directors responsible for this both civilly and criminally liable."

Following the news hitting the internet, many were stunned to learn of the company turning against its own founder. Though it was later revealed that such things are quite common in the business industry, netizens applaud Lee Soo-man for taking a brave stance and being willing to challenge the issue publicly and legally.

He has received massive support from fans and netizens in general as they realized the larger effects of the issue. Soo-man's stance is not only to protect his own distribution of shares but also the distribution of the same to other shareholders. This includes artists under SM Entertainment along with the profits they'll earn from their albums and comebacks.

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As fans realize the heat of the situation, they’re happy to learn that Lee Soo-man was quick to resolve the issue by taking proper action against it, which protects many people under the company. Naturally, they also hope the circumstances are resolved and their partnership with Kakao stands invalid.