Hanmi Pharm Resolves Conflict with 'Co-CEOs of Parent Holding Company'... Management Rights Secured by Brothers

Hanmi Science, Co-CEOs Song Youngsook and Lim Jonghoon
Eldest Son Lim Jongyoon Expected to Lead Hanmi Pharm
Apparent Conflict Resolved... Inheritance Tax Solution a Key Factor
Chairman Shin Dongguk Also Expected to Join Hanmi Pharm Board Directly

The management dispute within Hanmi Pharmaceutical Group, which arose over the issue of inheritance tax resolution, has been temporarily settled with the launch of a joint representative system between mother and son at the holding company. However, the actual management control was seized by the brothers, who won with the support of minority shareholders.

Im Jong-yoon and Song Young-sook, Co-CEOs of Hanmi Science (from left)

Hanmi Science, the holding company of Hanmi Pharmaceutical Group, held a board meeting on the morning of the 4th at Hanmi Tower in Songpa-gu, Seoul, and appointed Director Lim Jong-hoon as co-CEO alongside Song Young-sook, Chairwoman of Hanmi Pharmaceutical Group.

The Hanmi Pharmaceutical Group owner family had been in conflict since January when Chairwoman Song and her daughter, Vice Chairwoman Lim Joo-hyun, announced a merger with OCI Group to secure funds for inheritance tax. The eldest son, then President Lim Jong-yoon of Hanmi Pharmaceutical, and the second son, CEO Lim Jong-hoon of Hanmi Precision Chemical, opposed the merger. The conflict culminated at the regular shareholders' meeting on the 28th of last month, where the board nominations from the mother and daughter side, who had exercised management rights, were all rejected, while the brothers' nominations were all approved with the support of minority shareholders, marking a victory for the brothers.

At the Hanmi Science board meeting held that day, the brothers, who held the majority, appointed Director Lim Jong-hoon as co-CEO alongside Chairwoman Song Young-sook, giving the appearance that the conflict between the two sides had been resolved. The co-CEO system requires agreement from both mother and daughter for decision-making. The fact that the younger brother Lim Jong-hoon, rather than the main figure of the mother-son conflict Lim Jong-yoon, was appointed co-CEO seems to be a strategic move to prevent the recurrence of conflict and ensure smooth joint management. Unlike his older brother, who directly confronted the mother and daughter during the dispute, Director Lim Jong-hoon visited the mother and daughter side immediately after the merger decision to explain the situation.

Hanmi Pharm Headquarters View [Photo by Hanmi Pharm]

The establishment of the co-CEO system also appears to have been influenced by the unresolved inheritance tax issue. Since the passing of founder Lim Sung-ki in 2020, the Hanmi Pharmaceutical Group owner family was levied an inheritance tax of 540 billion KRW on their inherited shares in Hanmi Science. Although half of this was paid by last year, they have struggled to secure sufficient funds to fully resolve the issue, and several attempts to raise funds through share sales were all unsuccessful.

Since some inheritance tax must be paid by this month, both sides seem to have decided to join hands to resolve the matter. This is because inheritance tax must be paid jointly. The tax authorities can demand full or partial payment of unpaid inheritance tax from any of the heirs. Even if one side among the mother and daughter or brothers fully pays the inheritance tax corresponding to their inherited shares, if the other side does not pay, the tax authorities can seize the assets of the fully paying heir.

Hanmi Pharmaceutical to Operate Under CEO Lim Jong-yoon... Chairman Shin Dong-guk Also Expected to Join the Board

However, the brothers are expected to lead the group's major management decisions. At the Hanmi Science board meeting that day, it was also decided to hold an extraordinary shareholders' meeting for the key affiliate Hanmi Pharmaceutical. Through this, eldest son Director Lim Jong-yoon is expected to take the helm as CEO of Hanmi Pharmaceutical.

The brothers had previously stated their intention to manage Hanmi Pharmaceutical Group with separate CEOs for the holding company and subsidiaries, in accordance with the wishes of the late founder. Accordingly, younger brother Lim Jong-hoon will lead the holding company, while the elder brother will serve as CEO of the main operating company Hanmi Pharmaceutical. The pharmaceutical industry interprets this decision as influenced by the brothers' differing interests: Director Lim Jong-yoon focusing on pharmaceutical business such as new drug development, and CEO Lim Jong-hoon focusing on investments.

Lim Jong-yoon, Director of Hanmi Pharm (left), and Lim Jong-hoon, CEO of Hanmi Science, are shaking hands at a press conference held after the regular shareholders' meeting on the 28th of last month.
[Photo by Lee Chun-hee]

Meanwhile, the Hanmi Pharmaceutical board is expected to include not only the brothers Lim Jong-yoon and Jong-hoon but also Chairman Shin Dong-guk of Hanyang Precision Chemical, who sided with the brothers during the management dispute. Various discussions on share handling will need to take place in the future to resolve inheritance tax and secure funds for management. Chairman Shin, a major shareholder of both Hanmi Science and Hanmi Pharmaceutical, is expected to participate directly as a board member in this process.