[Invest&Law] Kakao Ventures 60 Billion Won Performance Bonus Lawsuit... Lim Ji-hoon "A Company Raised Like My Own Child"

Former CEO Lim Expresses Regret in Court
Case Referred to Mediation...Possibility of Settlement Between Both Sides

"In fact, in a way, this is a company I founded and have nurtured like my own child for a long time, and even signed a contract, so I still can't fully understand why the (performance bonus) hasn't been paid. I sincerely hope this will be resolved well."

Former Kakao Ventures CEO Lim Ji-hoon expressed his frustration in court over a lawsuit he filed against the company for approximately 60 billion KRW in 'performance bonus payments.' With Kakao Ventures indicating the possibility of mediation, there is hope that the dispute may be resolved through an agreement between both parties.

According to the legal community on the 13th, the Seoul High Court Civil Division 18-2 held the second trial hearing on the claim for approximately 59.8 billion KRW filed by former CEO Lim against Kakao Ventures on the 10th, deciding to proceed with mediation. Mediation is a system where the court helps the disputing parties communicate and propose settlement plans to reach an agreement. If mediation is successful, it has the same effect as a final judgment.

Former CEO Lim: "Later investors also received large performance bonuses"…Court Refers Case to Mediation

Although attendance is not mandatory in civil lawsuit hearings, former CEO Lim appeared in court in person for this hearing. Residing in New York, USA, he attended the trial for the first time and said, "The amount involved in this case may seem quite large, but in the venture capital (VC) industry, it is common to have performance fee contracts based on pre-agreed ratios." He also added, "Investors who invested later than me also received large performance bonuses."

Kim Beom-su, Chairman of Kakao's Management Innovation Committee (founder of Kakao), did not appear as a witness. Kim was indicted and detained on charges related to 'SM Entertainment' but was released on bail in October last year. Despite repeated requests for attendance from former CEO Lim's side and the court, Kim continuously submitted excuses for non-appearance.

However, Kim recently conveyed his position to the court in writing. It reportedly acknowledged that he discussed performance bonus payments with former CEO Lim and agreed that it is reasonable to receive compensation for contributions, but stated that payment is difficult due to procedural and regulatory reasons.

Regarding this, former CEO Lim's side described it as a "quite progressive response," but added, "We still believe Kim's attendance is necessary, but if he continues not to appear, we will have no choice but to request witnesses such as Jeong Shin-ah, CEO of Kakao."

Meanwhile, Kakao Ventures expressed willingness to 'negotiate through mediation' in court, and the case was referred to mediation. When the court asked, "If payment is difficult due to regulatory issues, does that mean you are willing to resolve it according to the court's decision?" Kakao Ventures replied, "Former CEO Lim agrees, and if the court proceeds with mediation, we are considering 'to sincerely participate in the process and then discuss the decision at the board of directors or shareholders' meeting.'

In response, former CEO Lim's side said, "Kakao is still the sole shareholder of Kakao Ventures, and Kim Beom-su is Kakao's largest shareholder. Kakao Ventures mentions issues of breach of trust related to performance bonus payments and regulatory violations, but there are precedents that following court mediation or decisions is not a breach of trust. If Kim is willing to resolve this and Kakao Ventures is also willing, they should take a more proactive stance than now."

With former CEO Lim scheduled to leave the country next week, the court decided to hold a mediation hearing on the 20th to hear detailed positions from both sides. The court stated, "This is not about us persuading anyone but listening to both parties and finding a middle ground," urging each side to make internal decisions.

Im Ji-hoon, former CEO of Kakao Ventures, Kim Beom-su, Chairman of Kakao Management Innovation Committee (Founder of Kakao).

Former CEO Lim was the inaugural CEO of 'K Cube Ventures,' established in March 2012. In early 2015, he signed a performance fee contract to receive 70% of the bonus, but the company was later incorporated into Kakao affiliates. After Lim was appointed Kakao CEO in August that year, the contract was revised to "change the compensation ratio to 44% but pay the full performance bonus regardless of the length of service."

Lim filed the lawsuit in March 2022. Although K Cube Ventures' first fund was liquidated, Kakao Ventures withheld payment citing that the 2015 agreement was not approved through a shareholders' meeting or board resolution. This fund acquired 1,000 pre-IPO preferred shares of Dunamu, the operator of the cryptocurrency exchange Upbit, for 200 million KRW. As Dunamu grew into a trillion-KRW scale company, Kakao Ventures earned over 300 billion KRW in profits.

During the trial, former CEO Lim's side emphasized, "At the time of the contract, Kakao Ventures was a single-shareholder company wholly owned by the founder Kim, and the approval was made through him. The claim that 'a shareholders' meeting was required' violates contractual obligations and causes damage to former CEO Lim."

The first trial ruled against former CEO Lim, stating "there were no related procedures." The court held that "for the performance fee amendment contract to be valid, a shareholders' meeting resolution was necessary, but it was not conducted."