[Alpha Biz= Kim Jisun] A legal dispute between the major shareholder and a financial investor of Line Games is intensifying, highlighting tensions over shareholder rights and governance in Korea’s private equity-backed tech sector.

According to investment industry sources, LY Corporation, the Japan-based controlling shareholder, and Anchor Equity Partners are engaged in an ongoing legal battle over the interpretation of key provisions in their shareholder agreement, including clauses related to business opportunities and capital increases.

The dispute dates back to 2018, when LY Corporation brought in Anchor Equity Partners as a financial investor and entered into a shareholder agreement. At the time, multiple affiliated entities—including Line Plus, Line Studio, and Line Play—were operating within the broader Line group. While LY Corporation’s stake in Line Games was diluted following external investment, it reportedly retained stronger control over other affiliates.

To address concerns that game development and publishing opportunities could be diverted to other affiliates, the investor is said to have secured contractual provisions granting exclusive decision-making rights and protections related to publishing operations.

However, controversy arose after certain business opportunities were reportedly allocated to other Line affiliates rather than Line Games, prompting allegations of breach of contract. While the investor maintains that such opportunities should have been channeled through Line Games, LY Corporation is understood to dispute the scope and interpretation of the relevant clauses, citing managerial discretion.

The conflict has since escalated into litigation. Anchor Equity Partners exercised a put option based on alleged violations of the shareholder agreement and filed a lawsuit. In the first trial, the court acknowledged that LY Corporation had breached the agreement but dismissed the investor’s claim by applying a strict interpretation of the conditions required to exercise the put option.

The case is currently under appeal at the Seoul High Court. Attention has intensified following a reported ruling by the Supreme Court of Korea that deemed LY Corporation’s refusal to submit key evidence during the initial trial as unlawful.

Separately, a recent capital increase has emerged as another point of contention. Last month, LY Corporation carried out a rights offering worth approximately KRW 11.7 billion for Line Games, issuing around 23.5 million common shares at a par value of KRW 500 per share. This reportedly led to significant dilution of existing investors’ stakes.

Anchor Equity Partners argues that the issuance violated contractual provisions prohibiting new share issuance below the original investment price, while the company maintains that the process complied with relevant procedures.

Industry observers note that the case reflects broader issues surrounding the enforceability of investor protection clauses in private company agreements, the interpretation of contractual rights in business operations, and the safeguarding of minority shareholders during follow-on financing.

There are also concerns that repeated instances of perceived failures to uphold investor protections could undermine foreign investor confidence in the Korean market.

 

 

 

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