[E-Daily Marketin YunJi Kim Reporter] 'Related Parties'

These five characters in an investment agreement rarely catch the eye of startup CEOs. It’s easy to dismiss them as merely a contractual term referring to the company’s CEO or largest shareholder.

In fact, when business is going smoothly, the “interested party” clause remains tucked away in a corner of the contract. This is because, as long as founders and investors share the common goal of corporate growth, this clause rarely becomes an issue. However, if a planned deal falls through or a legal dispute arises, the situation changes completely. This is because, as redemption rights and liability for damages are actually exercised, the company’s liabilities can spill over into the CEO’s personal debt.

At that point, those five characters in the contract become the basis for shaking not only the CEO’s salary, severance pay, and real estate but also the company’s equity and management control. A clause that was virtually invisible during good times returns as the heaviest burden of responsibility once things go wrong. This is why the recent debt dispute surrounding OGQ, South Korea’s largest intellectual property (IP) content startup, has drawn the attention of the venture capital (VC) industry.

According to the investment banking (IB) industry on the 16th, OGQ CEO Shin Cheol-ho received a court ruling ordering him to pay investors approximately 12 billion won in principal and interest. Although CEO Shin appealed the second-instance ruling, the Supreme Court dismissed his appeal last April, making the ruling final.

Founded by CEO Shin Cheol-ho in 2011, OGQ is a creator platform company that trades digital content such as emojis, images, and fonts. By operating platforms like Naver’s OGQ Market, it has secured 17 million users and 1.3 million creators, establishing itself as South Korea’s largest intellectual property (IP) marketplace.

What makes this case unusual is that, even though OGQ has the financial capacity to repay its debts and a resolution plan was in place, the CEO—designated as a “stakeholder”—was held personally liable for repayment. According to a comprehensive report by Edaily, OGQ holds approximately 40 billion won in assets, including cash and liquid assets. Although the company and approximately 70% of its shareholders supported a selective capital reduction or a sale to a third party—and even the investor who filed the lawsuit verbally agreed to the selective capital reduction—the process ultimately could not proceed due to opposition from some shareholders holding veto rights. Despite the availability of repayment funds and a resolution plan, the debt of approximately 12 billion won—comprising principal and interest—was ultimately determined to be the personal responsibility of CEO Shin.

Subsequently, the creditors seized CEO Shin’s salary, severance pay, and real estate, and then initiated a special liquidation procedure for his OGQ shares. Special liquidation is a procedure in which unlisted shares with low trading volume are sold in a manner determined by the court to recover debts. CEO Shin’s side argues that approximately 12% of his holdings would be sufficient to repay the debt, but if his entire stake—rather than just a portion—is sold, management control could be transferred to a third party.

In the venture capital industry, there has been a flood of criticism that this case serves as an opportunity to reexamine the scope of liability under the “interested party” clause. This is because, despite the company having assets to repay its debts and shareholders’ willingness to resolve the matter—and regardless of investors’ lawful exercise of their rights—the CEO’s personal assets and management control stake have become subject to enforcement.

In particular, the core of the controversy lies in the fact that, even though the contract contained no language regarding joint and several liability, the responsibility for repaying the investment was attributed to the CEO personally through the “interested party clause.” Some in the industry view this structure as effectively functioning as a backdoor joint and several guarantee and are expressing concerns that the intent behind the abolition of joint and several guarantees could be undermined once again within private investment contracts.

Given that a single contract clause can undermine a founder’s personal assets and management rights, there are calls to scrutinize a potential investor’s track record from the very beginning of the selection process. The argument is that one should not merely compare investment terms but also examine whether the investor engaged in negotiations when the business did not go as planned and to what extent it exercised its contractual rights.

Kim Han-jun, CEO of Altos Ventures, stated on social media, “Founders should not skimp on legal fees and must thoroughly verify the reputation of potential investors,” adding, “They should speak not only with founders of companies that performed well but also with two or three founders of companies that did not.” While evaluations of successful portfolio companies are readily available to the public, the experiences of founders who have faced conflicts or litigation are rarely made public. Therefore, to truly understand a venture capital firm’s actual tendencies, one must examine cases where the business did not go as planned.

Given the limitations of pre-investment due diligence alone, there are calls for institutional reforms. Kim Hak-kyun, Chairman of the Korea Venture Investment Association, told Edaily, “At a time when we should be doing everything we can to encourage and support startups, it is regrettable that such incidents are occurring in the industry.” He added, “The association needs to investigate cases where founders suffer harm due to regulatory blind spots, and we will continue to push for legislative amendments to prevent such issues.”

This incident has drawn attention not only from the VC industry but also from the National Assembly. Regarding this, CEO Shin told Edaily, “Given the court’s ruling, it will be difficult to avoid personal bankruptcy,” but added, “Since the market is paying close attention, we may be able to prevent situations where the Joint Guarantee Prohibition Act is circumvented due to loopholes in the stakeholder provisions.”