[Edaily Marketin Song Seung-Hyeon Reporter] Lim Ji-hoon, former CEO of Kakao, has filed another lawsuit against Kakao Ventures and Kakao founder Kim Beom-soo over performance fees for the Kakao Youth Startup Fund. Previously, in the lawsuit regarding performance fees for the K-Cube Fund No. 1, the court dismissed former CEO Lim’s claim on the grounds that there was no resolution passed at a shareholders’ meeting. Legal experts believe that since the contractual structure is the same in this case, the same legal principle is likely to apply.

According to sources in the venture capital (VC) industry and legal circles on the 5th, former CEO Lim filed a lawsuit last September in the Seoul Central District Court against Kakao Ventures and founder Kim, seeking payment of performance fees from the Kakao Youth Startup Fund. The claimed amount is reportedly 4 billion won. Kakao Ventures maintains that there is no basis for such payment.

From K-Cube Fund No. 1 to the Youth Startup Fund… A 10-Year-Old Contract Leads to Litigation

Former CEO Lim served as the first CEO upon the establishment of K-Cube Ventures (now Kakao Ventures) in 2012. In June of the same year, he formed the K-Cube Fund No. 1 venture investment partnership, which invested in Dunamu. In January 2015, he signed performance fee agreements for each fund, stipulating that he would receive 70% of the priority allocation from K-Cube Fund No. 1 and 60% of the priority allocation from the Youth Startup Fund. The percentage for K-Cube Fund No. 1 was later adjusted to 60% as additional management staff were brought on board. The original contract included a clause stating that performance fees would not be paid if the term of service was four years or less.

In March of the same year, Kakao acquired a 100% stake in K-Cube Ventures. Former CEO Lim was appointed CEO of Kakao in September and stepped down as CEO of K-Cube Ventures. At the end of that year, an amended agreement was signed to reduce the priority allocation for the two funds to 44% and 22%, respectively. Former CEO Lim’s side received a confirmation letter from the company in February 2018. The letter stated that the ratio change fully reflected his contributions prior to his appointment as CEO and that the full amount would be paid regardless of the length of his tenure.

K-Cube Fund No. 1 was liquidated in December 2021. When Kakao Ventures suspended payment, arguing that the amendment had not been approved by a general shareholders’ meeting or a board resolution at the time, former CEO Lim filed a lawsuit in March 2022 seeking approximately 59.8 billion won. In November 2023, the court ruled against the plaintiff, and the case proceeded to the appellate court. It was referred to mediation in January of last year, where both parties reached a settlement.

Legal Experts: “A Confirmation Letter Cannot Substitute for a General Shareholders’ Meeting Resolution”

The Youth Startup Fund was liquidated in July of this year. After Kakao Ventures replied in August that there was no basis for payment, former CEO Lim filed a second lawsuit in September. However, legal experts believe it is highly likely that the second lawsuit will reach the same conclusion as the first trial. The trial court accepted former CEO Lim’s argument that the amendment agreement was a settlement excluding the term-of-service clause and confirming a 44% payment. However, the court ruled that the amendment agreement was invalid because, under Article 388 of the Commercial Act, director compensation must be determined by a general shareholders’ meeting resolution unless specified in the articles of incorporation, and performance-based bonuses are included in director compensation.

The court noted that Kakao Ventures’ performance bonus payment regulations only specified the total amount—that 50% of the fund’s performance fees would be distributed to executives and employees. Since the regulations did not delegate the decision on individual allocations to the board of directors, the court ruled that the general meeting of shareholders must determine who receives what amount. The court found that changing former CEO Lim—who was not originally eligible for payment—to a confirmed recipient was not an amendment that could be made solely by agreement between the parties. It also stated that there was no evidence that Kakao, which was the sole shareholder at the time, had approved the amendment agreement.

Former CEO Lim’s side maintains that the Youth Startup Fund contract was not, from the outset, a matter requiring a resolution by the general shareholders’ meeting. Legal analysts note that while the 2018 confirmation letter was drafted in a manner favorable to former CEO Lim during the contract interpretation phase in the first-instance trial, it did not resolve the issue of the lack of a general shareholders’ meeting resolution. They suggest that if this latest confirmation letter merely reaffirms the existing contract terms, it is unlikely to change the legal assessment. One attorney stated, “A resolution by the general meeting of shareholders regarding directors’ compensation is a strict requirement under the Commercial Act,” adding, “Since the contract was deemed invalid in the first trial, it seems unlikely that the conclusion will change based solely on a confirmation letter.”

This is also believed to be the reason why Founder Kim was named as an individual defendant. During the appellate phase of the first lawsuit, former CEO Lim’s side sought to hold Founder Kim accountable for the contract amendment process by requesting him as a witness. In response, Kakao agreed to a settlement with former CEO Lim during the appellate proceedings. The interpretation is that this time, Kakao has adopted a strategy of including Founder Kim in the lawsuit from the first-instance trial onward. Another attorney explained, “Even if it is difficult to establish legally, including Founder Kim as a defendant in the first lawsuit could be a way to strike at the opponent’s weak spot,” adding, “However, even if the claim against the company is blocked by the requirements for a shareholders’ meeting resolution, there remains room for a separate dispute to hold the individual who spearheaded the contract amendment accountable.”