This article was displayed on the ChosunBiz MoneyMove (MM) site at 2:51 p.m. on Feb. 20, 2026.
A lawsuit by a venture capital (VC) firm seeking the return of investment funds from the founder and former CEO of a bankrupt startup is headed to the Supreme Court. The founder and former CEO has filed an appeal after the first and second trials both sided with the VC. The venture investment industry is watching to see what conclusion the Supreme Court will reach.
According to the legal community and the venture capital (VC) industry on the 20th, the Supreme Court on Jan. 22 accepted the third-trial case filed by Shinhan Capital seeking payment for stock acquisition against Ha Jin-woo, former CEO and founder of Urbanbase. The Supreme Court then served a notice of receipt of the appeal record to Ha's side on the 5th.
This follows Ha, the former CEO, receiving a dismissal in the second trial in Dec. last year and moving to file an appeal; Ha is expected to submit the appellate brief on the 25th. Article 427 of the Civil Procedure Act requires the appellant to submit an appellate brief within 20 days after receiving the notice of receipt of the appeal record.
Ha, the former CEO, is currently obligated to pay about 1.3 billion won to Shinhan Capital, an investor in Urbanbase. In the first trial of the lawsuit for payment for stock acquisition filed by Shinhan Capital, the court ordered Ha to return about 1,252.05 million won to Shinhan Capital, and the second trial dismissed the appeal and upheld the original ruling.
The 1,252.05 million won that Ha must bear stems from an investment agreement concluded when Shinhan Capital invested 500 million won in Urbanbase in Nov. 2017. The agreement included a clause allowing a demand for the company or the founder to buy back the held equity upon the occurrence of events such as liquidation, bankruptcy, or rehabilitation.
Urbanbase, a spatial data analytics company, saw its management deteriorate after its 2014 launch due to a real estate slump and failure to secure additional investment, and it entered corporate rehabilitation at the start of 2024. Under the contract, Shinhan Capital moved to claim payment for stock acquisition, and after the company went bankrupt in July 2024, it sued the founder.
The case became widely known to the public after Ha, the former CEO, wrote on a personal social networking service (SNS), "They placed a provisional seizure on the home where my three children and I live together," adding, "This house belongs to our family and was protected by my wife, who alone worked hard to make ends meet and cover the loan."
Ha's side argued, "Even though the company was operated legally in compliance with rules and procedures, a structure that demands the founder personally pay back the entire investment plus a high interest rate of 15% compounded annually just because the result was failure is not reasonable," but both the first and second trial courts rejected the argument.
The first trial court said, "It is hard to view as contrary to the basic order of our society or good morals that, in general, parties to a contract impose certain responsibilities on a third party with a substantial interest to diversify risk or secure collateral for recovery," and ordered Ha to return 1,252.05 million won to Shinhan Capital.
The second trial was the same. In particular, the second-instance court, regarding the clause that an interested party (the founder) bears joint and several liability with the company, said, "It is an agreement guaranteeing recovery of the investment in specific situations such as the commencement of rehabilitation proceedings, and rationality is recognized in light of the balance of mutual interests and risks between the parties."
Ha, the former CEO, is expected to argue misinterpretation of the law at the court of law (the Supreme Court), not at the courts of fact (the first and second trials). Above all, a key issue will likely be whether the lower courts' view—that imposing unlimited liability on a founder without management fault does not violate Article 103 of the Civil Act (violation of social order)—was appropriate.
Focusing on the fact that the Supreme Court is a "court of law" that examines the propriety of applying legal principles rather than factual findings, Ha is expected to probe the lower courts' misapplication of law. This is because it may be possible to argue invalidation of clauses under the Act on the Regulation of Terms and Conditions, given that the substantial nature of the contract was an institution's unilateral "standard terms," not an individually negotiated agreement.
Ha's appeal is also drawing intense interest from the venture investment industry. If Shinhan Capital prevails even at the Supreme Court, the final instance, cases holding founders jointly and severally liable could surge. Immediately, if VCs do not proceed with stock redemption suits against founders as Shinhan Capital did, it could amount to a breach of duty.
In fact, Shinhan Capital has characterized the lawsuit against Ha, the former CEO, as "a legitimate exercise of rights based on a lawful contract." The company argues that problems such as breach of duty could arise if it does not exercise rights specified in the contract—such as "the amount equal to the investment principal plus 15% compounded annually must be paid as a penalty."
Although the government, including the Ministry of SMEs and Startups, has implemented a ban on imposing joint and several liability on startup founders since 2022, there are blind spots. This is because investment contracts before 2022 still include clauses stating that "the CEO personally bears joint and several liability with the company."
In addition, VCs in Korea's venture investment market are split between "venture investment companies" under the Venture Investment Promotion Act (under the jurisdiction of the Ministry of SMEs and Startups) and "new technology business finance companies" under the Specialized Credit Finance Business Act. New technology finance companies, supervised by the Financial Services Commission, can still impose joint and several liability on founders despite the ministry's ban.
An industry official in venture investment said, "Startups are inherently a high-risk industry, and the government has expanded the policy of banning joint and several liability in consideration of this," adding, "Even if past contracts are legally valid, if lawsuits like this are repeated, the side effects of dampening the startup ecosystem will be greater."
Meanwhile, some argue that founders are not without responsibility. A startup CEO said, "Startups also sign contracts after seeking legal advice," adding, "Even while knowing the condition that in the worst case they must buy back the shares, they may have complacently judged that such a situation would not occur."