HYBE sends requests to SM following the ban on SM’s issuance of new shares, “This is a chance to get rid of unfavorable contracts”
HYBE sent another letter to SM Entertainment.
On March 3rd, the Seoul Eastern District Court decided to grant the injunction that former executive producer Lee Soo Man filed against SM to ban the company from issuing new shares and convertible bonds.
On March 6th, HYBE released a statement with follow-up measures containing several requests to SM, including prohibiting acts contrary to the purpose of the decision in the provisional disposition, immediately terminating all the investment contracts, including new stock acquisition contracts and convertible bond acquisition contracts, immediately terminating the business cooperation contract signed with Kakao, and withdrawing all the board director candidates recommended by Kakao and the agenda for the appointment at the general shareholders’ meeting.
In particular, “acts contrary to the purpose of the decision in the provisional disposition” include notification of accounts or receipt of payments for convertible bonds, e-registration and issuance of stocks/convertible bonds certificates, application for registration, etc.
The “business cooperation contract” SM signed with Kakao can be terminated because the court’s decision on the provisional disposition already made it impossible to close their transactions. In this regard, HYBE said, “This business cooperation contract contains provisions that are disadvantageous to SM and too beneficial to Kakao.” In addition, HYBE also asked SM to “exercise its right to withdraw director candidates recommended by Kakao.
HYBE emphasized, “Since this is an opportunity for SM to get rid of illegal investment contracts and unfavorable business cooperation contracts, failure to fulfill or violate such requests for follow-up measures is a deliberate breach of trust that can deprive SM of its significant rights.”
In addition, HYBE requested SM’s board of directors and individual directors to implement the requests by March 9th.