A recent ruling by the Seoul Central District Court enforces a personal stock repurchase obligation against a startup CEO, potentially setting a precedent that may shift how venture capital agreements are structured in Korea.

On July 16, 2025, the 46th Civil Division of the Seoul Central District Court (Presiding Judge Kim Hyeong-cheol) ruled in favor of a venture capital firm in a lawsuit concerning the enforcement of a stock repurchase clause. The suit (2024 Gahap 59259) was filed by Venture Capital Company A against Mr. B, the CEO of Company C, a financially distressed startup. The Seoul Central District Court, in short, enforced the clear wording of the VC agreements.

Background: Investment and Repurchase Clause

1. In 2017, Company A invested KRW 500 million into Company C via Redeemable Convertible Preferred Shares (RCPS).
2. As part of the investment agreement, Mr. B, then CEO and majority shareholder of Company C, signed a contract which included a clause obligating him to repurchase the shares personally if Company C entered rehabilitation, liquidation, or bankruptcy proceedings.
3. This type of clause, a put option or stock repurchase clause, is not unusual in Korean venture capital transactions. However, it is not common for founders to bear personal liability under such clauses, especially in cases of corporate insolvency.
4. In December 2023, Company C filed for rehabilitation proceedings with the Seoul Bankruptcy Court due to severe liquidity issues. Rehabilitation was formally commenced in January 2024.
5. Company A then demanded that Mr. B repurchase the shares pursuant to the investment contract. When he refused, Company A initiated legal proceedings, seeking KRW 1.2 billion, which included the original investment and 15% annual compound interest.
6. Mr. B challenged the claim on two grounds under the Korean Civil Act:

• Article 103 – asserting the clause violated public order and good morals, and
• Article 104 – alleging the clause constituted an unfair legal act due to a severe imbalance in contractual obligations.

The Seoul Central District Court’s Ruling: Founder Held Personally Liable

The court rejected Mr. B’s arguments and found in favor of Company A. The court emphasized:

• Mr. B was a savvy and knowledgeable party who executed the agreement as both CEO and the largest shareholder.
• There was no evidence of duress, fraud, or unconscionability at the time of contract formation.
• The clause in question was not deemed to violate public order or the social norms of Korean society.

Accordingly, the court enforced the contractual obligation and held that Mr. B must pay the KRW 1.2 billion to Company A.

Key Takeaways for Founders and Investors in Korea

1. Due Diligence Matters: Founders must thoroughly review any stock repurchase or guarantee clauses, particularly those that assign personal obligations in case of insolvency. Courts are likely to enforce these obligations.
2. Contractual Clarity Is Essential: Investors and startups should clearly define contingencies, triggers, and liability allocation in investment agreements.

We shall update the reader on any further developments in this matter, including the results of any appeals. For an article on Korean Corporate Law, please see: IPG Legal’s Corporate Law and Compliance Archive and IPG Legal’s Contract Law Archive.

Sean Hayes is a leading international attorney, recognized for his work in cross-border litigation, corporate advisory, and dispute resolution. He is the first non-Korean attorney to have worked for the Korean court system. Sean regularly advises multinational companies, startups, and government agencies on complex commercial and regulatory matters in Korea and throughout Asia.

Sean leads IPG Legal’s Korea Practice and has been praised for his strategic approach to high-stakes litigation, M&A transactions, and venture capital structuring. His insights are frequently cited in regional legal publications and global media.

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