Seoul District Court to Hold Closed Hearing on April 30 Regarding General Meeting Convening
The Key Issue is Whether Criminal Liability Can Be Imposed
The outline of the conflict between Min Hee-jin, CEO of ADOR, and HYBE, which has escalated into a legal battle, is expected to become clearer. The Seoul Central District Court has begun hearings on HYBE's request to convene an extraordinary general meeting of shareholders to dismiss CEO Min Hee-jin. HYBE filed the request after reporting Min and others to the Yongsan Police Station on the 25th of last month on charges of breach of trust.
The core of the conflict lies in whether HYBE can hold CEO Min criminally liable for 'breach of trust in the course of duty' and other charges. Depending on the outcome, the amount HYBE can acquire from Min's shares could vary significantly, from a maximum of 100 billion KRW to a minimum of 3 billion KRW.
According to industry sources on the 1st, the shareholder agreement of ADOR states that "if CEO Min and others violate the contract, HYBE has the right (call option) to purchase all shares held by CEO Min and others directly or through a third party designated by HYBE."
At this time, the purchase price per share for the call option target shares is stipulated to be the lesser amount between the par value per share and 70% of the fair value.
If the breach of trust claimed by HYBE is recognized, HYBE can buy Min's shares based on the shareholder agreement at approximately 286.58 million KRW, which corresponds to a par value of 5,000 KRW per share. When Min repays the approximately 2 billion KRW personally borrowed from HYBE Chairman Bang Si-hyuk at the time of acquiring ADOR shares, Min may effectively end up with nothing.
Originally, Min has the right (put option) to sell 18% of the company's shares at a predetermined price starting from the end of this year. This is currently estimated to be around 100 billion KRW.
At present, Min has no way to prevent dismissal as CEO. HYBE is the major shareholder holding 80% of ADOR's shares, and dismissal of the CEO is possible through the approval of the majority of shareholders. It is expected that replacing the management will take about two months.
HYBE claims that Min planned to recruit external investors to make ADOR independent and to take away its affiliated artist, NewJeans, alleging breach of trust in the course of duty. The key issue is whether HYBE can hold Min liable for breach of trust due to violation of fiduciary duty.
A HYBE official stated, "There are sufficient grounds for Min's breach of trust, and disclosing such shareholder agreement details externally is also a breach of confidentiality, which is grounds for contract termination," adding, "Min should sincerely cooperate with the upcoming investigation by authorities and await the court's judgment."
Within the legal community, it is expected that proving HYBE's claim of breach of trust will not be easy. The prevailing view is that based on the evidence revealed so far, it is difficult to conclude that Min gained financial benefits through breach of trust or caused damage to ADOR. Breach of trust in the course of duty does not punish preparatory or conspiracy stages.
If there is evidence of initiation, even if the plan failed, criminal punishment for attempted breach of trust is possible. However, merely contacting external investors is insufficient to conclude that there was an "attempt to seize ADOR's management rights."
If Min argues that "he only met with investors to discuss company value-up as management" or "he was merely gauging the exit of a 5% stake not subject to put options as a minority shareholder," HYBE's breach of trust claim may lose persuasiveness.
If Min is acquitted, he may file a civil lawsuit against HYBE, claiming "unjustified dismissal through shareholder resolution," seeking invalidation of the shareholder resolution or a provisional injunction to confirm his director status.
Regarding this, HYBE stated, "We do not intend to respond to the exhausting attempts to reduce the illegal management rights takeover attempt to a dispute over compensation or a retaliatory frame," and added, "We have completed legal reviews confirming sufficient grounds for breach of trust against Min, and since multiple other illegal acts have been discovered, actions will be taken accordingly."
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