[Forest of Innovation] Partner Attorney An Il-un, Column Contribution: When Management Consent Rights in Investment Contracts Become Invalid

Law firm Veat partner An Il-woon wrote a column on the invalidity of management consent rights in investment contracts for startups in Innovation Forest.

Management Consent Rights and the Principle of Shareholder Equality

A management consent right is a right that requires an investor to pre-consent to the company’s major management decisions and is often included in clauses when investors inject funds into startups. However, according to the principle of shareholder equality, all shareholders should have the same rights proportional to the number of shares they hold. Therefore, special rights such as management consent rights can violate the principle of shareholder equality if they are granted only to some shareholders.

​An Il-woon, partner, thoroughly explained the necessity of shareholder agreements, especially their role and importance in venture companies, through several Supreme Court cases in the Innovation Forest column. You can check the details on how shareholder agreements affect company operations and how to prevent and resolve potential legal issues that may arise through the content below.

• When is a management consent right in an investment contract invalid?(Innovation Forest)

Both startups and investors should carefully review whether management consent rights are set within the legally valid scope when entering into a shareholder agreement. The elements to be considered when drafting an investment contract have become clearer through Supreme Court cases, and it is important to analyze each case carefully and design the optimal contract structure, rather than simply following existing contracts as a matter of course. Startup investors need to consult with legal professionals to clearly understand management consent rights and other contract conditions, and to minimize legal risks.

​IT specialist lawyer An Il-woon, partner, who participates as an external contributor to the startup growth analysis platform Innovation Forest, has extensive experience in M&A, investment, and intellectual property protection for startups and IT companies and provides various consulting services in domestic and international startup investment transactions. We design optimal investment contract structures that minimize legal risks for startup founders and investors, and also provide active legal advice in areas such as corporate control protection, shareholder agreements, and intellectual property disputes, focusing on establishing a legal foundation for IT and technology-centric companies to grow rapidly.

Thank you.

Law firm Veat