Conflict Between Co-CEOs Resolved at Hanmi Pharm... Brothers Take Over Management Rights (Comprehensive)

Co-CEOs Song Young-sook and Lim Jong-hoon Lead HanmiScience
Eldest Son Lim Jong-yoon Expected to Head HanmiPharm
Apparent Conflict Resolved... Inheritance Tax Solution a Key Factor
Chairman Shin Dong-guk Also Expected to Join HanmiPharm Board Directly

The management dispute within Hanmi Pharmaceutical Group, triggered by the issue of inheritance tax resolution, has 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-hoon 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 company explained, "We have reached a generous agreement to manage the new Hanmi based on family cooperation and harmony."

In January, Hanmi Pharmaceutical Group announced a merger with OCI Group to secure funds for inheritance tax under the leadership of Chairwoman Song and her daughter, Vice Chairwoman Lim Joo-hyun. However, 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 plan, sparking internal family conflict between mother and daughter and the brothers. The conflict culminated at the regular shareholders' meeting on the 28th of last month, where the mother and daughter’s director nominations were all rejected, while the brothers’ nominations were all approved with the support of minority shareholders, marking a victory for the brothers. Through this, the brothers' appointees hold a majority with five out of nine members on the Hanmi Science board.

At the first board meeting attended by all nine directors after the shareholders' meeting, Director Lim Jong-hoon was appointed co-CEO alongside Chairwoman Song, outwardly signaling a reconciliation of the conflict between the two sides. The co-CEO system requires mutual agreement between the mother and son for final decision-making. Notably, it is the younger brother Lim Jong-hoon, not the elder brother Lim Jong-yoon who was a central figure in the mother-son conflict, who took the co-CEO role, which appears to be a strategic move to prevent recurrence of conflict and ensure smooth joint management. Unlike his elder brother who directly confronted the mother and daughter during the dispute, Director Lim Jong-hoon personally visited the mother and daughter side to explain the situation immediately after the integration decision.

Hanmi Pharm Headquarters View [Photo by Hanmi Pharm]

The establishment of the co-CEO system also seems influenced by the unresolved inheritance tax issue. Since the passing of founder Lim Sung-gi in 2020, the Hanmi Pharmaceutical Group owners were imposed an inheritance tax of 540 billion KRW on the Hanmi Science shares they inherited. Although half of this was paid by last year, securing sufficient funds to fully resolve the issue has been challenging. Attempts to raise funds through share sales were made several times but ultimately failed.

With part of the inheritance tax due by this month, both sides appear to have decided to join hands to resolve the matter for now. The inheritance tax must be paid jointly. Tax authorities can demand full or partial payment of unpaid inheritance tax from any of the heirs. Even if one side, either 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 paid heir.

Additionally, the board discussed future management matters including ▲ changes and establishment of company work, rank, and compensation systems ▲ establishment of employee welfare and education support teams ▲ dividends from Hanmi Pharmaceutical and Beijing Hanmi Pharmaceutical. Specific details will be decided at the next board meeting.

Hanmi Pharmaceutical to Operate under CEO Lim Jong-yoon... Chairman Shin Dong-guk Likely to Join Board

Even with the joint management system in place, the brothers are expected to lead the group’s key management decisions. The Hanmi Science board also decided to hold an extraordinary shareholders' meeting for the core affiliate Hanmi Pharmaceutical. Through this, eldest son Lim Jong-yoon is expected to become CEO of Hanmi Pharmaceutical.

The brothers previously stated, "Following the founder’s will, we will manage Hanmi Pharmaceutical Group with separate CEOs for the holding company and subsidiaries." Accordingly, the younger brother Lim Jong-yoon will lead the holding company, while the elder brother will head the main operating company Hanmi Pharmaceutical. The pharmaceutical industry interprets this decision as influenced by the brothers’ differing interests: Lim Jong-yoon focusing on pharmaceutical business such as new drug development, and Lim Jong-hoon focusing on investments.

Lim Jong-yoon, Director of Hanmi Pharm (left), and Lim Jong-hoon, Co-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 will not only include brothers Lim Jong-yoon and Lim Jong-hoon as inside directors following their appointments at Hanmi Science, but Chairman Shin Dong-guk of Hanyang Precision, who sided with the brothers during the management dispute, is also expected to join as an outside director. Hanmi Pharmaceutical’s articles of incorporation allow up to 10 directors, currently there are six. The plan is to fill the remaining seats with the two brothers, Chairman Shin, and one more outside director.

Chairman Shin’s appointment as outside director appears related to future group financing. As various discussions on share handling will be necessary to resolve inheritance tax and secure management funds, it is analyzed that Shin, the largest individual shareholder of both Hanmi Science (12.15%) and Hanmi Pharmaceutical (7.72%), will directly participate in related discussions.