[Exclusive] Startup Accelerator Drafts 'Management Transfer Agreement' with Portfolio Company While Concealing from Mother Fund

Tap Angel Partners Drafts Agreement Directly, Not in Fund's Name
No Report to Mother Fund or Other LPs... Confidentiality Pact Included

Tab Angel Partners (hereinafter "Tab Angel"), a startup accelerator (AC) that manages funds sourced from the Korea Fund of Funds, was found to have drafted an agreement in which it would effectively take over the management rights of a portfolio company in exchange for covering up fraudulent accounting practices. It was further revealed that a confidentiality agreement was signed to ensure the contents of this agreement would not be released to the public.

According to the investment banking (IB) industry on April 21, Tab Angel drew up a stock transfer agreement with CEO Jung of the drone manufacturing company Intosky in November last year.

According to the agreement, if requested by Tab Angel, CEO Jung must transfer approximately 77% of his shares in Intosky to Tab Angel or to a third party designated by Tab Angel. This essentially allows Tab Angel, as the general partner (GP) managing the fund, to take control over the management and ownership of the portfolio company.

Tab Angel is an AC based in Incheon that supports startups. It is also an operator for the Ministry of SMEs and Startups' TIPS (Tech Incubator Program for Startup) program. Earlier this year, Tab Angel was selected as an operator for LIPS (a small business investment linkage program) and Scale-up TIPS, targeting growth-stage companies. As of the end of last year, it had formed investment associations totaling KRW 55 billion and had invested in 64 companies. In terms of scale, it ranks among the top ACs in Korea.

Previously, in 2023, Tab Angel invested in redeemable convertible preference shares (RCPS) of Intosky through its “Tab Angel Partners Incheon Innovation Startup Investment Association No. 2” and “Tab Angel Partners ESG Investment Association No. 7,” among others. Combined, these two funds hold about a 5.3% stake. Of these, Incheon Innovation Startup Investment Association No. 2 is a fund to which the Korea Fund of Funds contributed KRW 4 billion.

The background to CEO Jung’s signing of a stock transfer agreement with Tab Angel appears to be that Tab Angel agreed not to raise issues about internal wrongdoing at the company, in exchange for the agreement.

In the first clause of the agreement, CEO Jung stated, “As CEO of Intosky, I express deep regret regarding the double remittance incident at the company and the subsequent accounting fraud committed to cover it up. As the person with ultimate responsibility, I am signing this agreement with Tab Angel.”

Notably, Tab Angel did not share the existence or contents of this agreement with the fund’s limited partners (LPs) or other shareholders of Intosky. The fund LPs include the Korea Fund of Funds, and among Intosky’s shareholders is the Korea SMEs and Startups Agency.

Furthermore, Tab Angel included a clause in the agreement specifying a penalty of KRW 500 million in the event that the contents became known externally. This indicates that Tab Angel was aware in advance of the potential problems if the agreement itself was leaked.

In response, Tab Angel stated, “Intosky was struggling and was in the process of pursuing a merger and acquisition (M&A). A strategic investor (SI) reviewing the acquisition requested this type of agreement to proceed with the contract, which is why it was drafted.” The company added, “Before drafting the agreement, we fully shared the details with other investors and shareholders of Intosky and received their tacit consent.”

They further commented, “Since the M&A did not actually take place, there was no need to report this matter to the Korea Fund of Funds. The reason Tab Angel—not the fund—was the contracting party is that the agreement was signed in our capacity as the GP.”

This content was produced with the assistance of AI translation services.