Law to conclude injunction within 2 weeks after hearing
Issues include contract breach and embezzlement
HYBE faces additional allegations of 'insider trading'
Legal circles say "Lawsuit battle for public opinion will continue"
A trial that will determine whether Min Hee-jin, CEO of ADOR, will retain or be dismissed from her position begins on the 17th. Min’s side, ahead of ADOR’s extraordinary general meeting of shareholders, has requested the court to "prohibit HYBE, the opposing party in the dispute, from exercising voting rights on the agenda item 'dismissal of the CEO'."
If the court rules in favor of Min, HYBE will not be able to remove her at this extraordinary general meeting. Conversely, if the injunction is dismissed, Min must immediately relinquish management rights. However, legal circles predict that "since this is a battle involving billions of won, legal disputes will continue even after the injunction decision is made."
"The key to the injunction case judgment lies in the shareholder agreement"
According to legal circles on the 16th, the Seoul Central District Court Civil Division 50 (Presiding Judge Kim Sang-hoon) will hold a hearing for the injunction at 10:45 a.m. on the 17th. Earlier, Min’s side publicly disclosed the injunction application on the 7th, stating, "HYBE requested the convening of an extraordinary general meeting on the agenda of dismissing Min, which violates the shareholder agreement signed with Min." Min appointed the law firm Sejong as her legal representative, while HYBE, the respondent, appointed Kim & Chang law firm.
Originally, since HYBE holds 80% of ADOR’s shares, if HYBE voted in favor of Min’s dismissal at the extraordinary general meeting, dismissal would have been inevitable. However, Min’s injunction application introduced a variable. An injunction to prohibit voting rights is a procedure requested when there is a dispute between stock transferors and transferees or when a dispute arises regarding stock validity, to prohibit exercising voting rights on those shares at the shareholders’ meeting. Since a separate (main) lawsuit can take a long time to conclude, the injunction aims to prevent urgent damage or risk. The injunction decision usually comes about two weeks after the hearing.
In the injunction hearing, a dispute is expected based on the shareholder agreement between HYBE and Min. Lawyer Park Seong-ha of law firm Dongin said, "HYBE will argue that 'exercising voting rights does not violate the contract,' while Min’s side will claim that 'exercising voting rights in favor of the dismissal agenda violates the contract.'"
Yang Tae-jung, lead attorney at law firm Gwangya, explained, "Normally, a major shareholder can exercise shareholder rights, but in this case, they are asking to block the exercise of rights. The court will examine whether there is a 'special reason' to restrict voting rights, that is, whether HYBE has committed a serious wrongdoing." Yang added, "However, HYBE also claims that 'the party who breached the contract is actually Min.' For the injunction to be accepted, HYBE’s fault must be significant, but if both sides have violations, it will be difficult to block shareholder rights."
The length of service clause in the shareholder agreement is also a point of contention. Min’s side argues, "Since she is to fulfill her duties as CEO for five years, she cannot step down." This is to maintain the symbolic idol group NewJeans, which is making a comeback on the 24th, and to protect the company’s value.
"Prolonged civil and criminal disputes expected"… keen attention on breach of trust allegations
HYBE is expected to raise allegations of breach of trust against Min in court. On the 22nd of last month, HYBE initiated an audit of ADOR’s management citing an "attempt to seize management rights" and filed a complaint against Min and others for breach of trust in the course of business. HYBE explained, "We activated audit rights due to suspicions of leaking important materials or attempts to take over ADOR’s management rights." Min’s side, however, insists that "the breach of trust allegations are groundless."
Lawyer Park noted, "Although this is a criminal matter, the civil court will also examine HYBE’s claims of 'illegal acts' and the evidence presented." Lead attorney Yang said, "The key issue is the suspicion that ADOR’s vice president took internal artist exclusive contract documents out of ADOR. If those documents were used to devise any strategy, it could be a problem involving trade secret leakage."
If the court rules in favor of Min in this injunction, HYBE cannot immediately dismiss her. Instead, HYBE can appeal the injunction decision or present new evidence to reconvene the extraordinary general meeting.
Conversely, if the injunction is dismissed, HYBE gains the upper hand in the management rights dispute. Although Min can appeal the dismissal or file new injunctions seeking cancellation of the shareholders’ meeting resolution or recognition of her continued duties as CEO, the effect of the extraordinary general meeting’s decision (dismissal) remains until a new ruling is made. Lead attorney Yang stated, "If the dismissal agenda passes at the extraordinary general meeting, Min cannot perform her duties."
Additionally, both sides may file damages claims against each other, and there is also a possibility that NewJeans will file an injunction to suspend the validity of their exclusive contract against HYBE in support of Min.
Deepened conflict amid contract renegotiations… HYBE raises successive allegations
Legal circles view the essence of this dispute as a "money issue." Lawyer Jo Soong-hee of law firm DLG said, "This is a case not uncommon in the entertainment industry. When the relationship between a parent company (investor) and a subsidiary (investee) breaks down, money issues remain." Another lawyer added, "Without disclosure of specific contracts and articles of incorporation, both sides are waging a public opinion battle. Usually, in management rights disputes, parties file lawsuits first and then try to leave room for settlement later."
The conflict between HYBE and Min reportedly arose during renegotiations of the shareholder agreement and valuation discussions. According to industry sources, the shareholder agreement drafted by both sides states that "if Min and others breach the contract, HYBE has the right to purchase all shares held by Min and others (call option)." Min holds 18% of the company’s shares and has the right to sell 13% at a predetermined price starting at the end of this year (put option), with the price set at 13 times the average operating profit over the past two years. This is estimated at about 100 billion won. Min denied the management rights takeover allegations, saying, "I earn 100 billion won even if I do nothing."
In response, HYBE emphasized, "During contract negotiations, Min requested to raise the put option multiple from the existing 13 times to 30 times." Min’s side countered, "This reflected the value of a boy group to be produced later and was just one of several proposals." Until all shares are disposed of with HYBE’s consent, there is a non-compete obligation (restricting work in competing industries for a certain period after resignation), and 5% of Min’s 18% shares cannot be sold without HYBE’s consent, necessitating adjustments in the shareholder agreement renegotiation.
As negotiations broke down, HYBE raised suspicions of "seizing ADOR’s management rights," while Min’s side accused HYBE of "copying ADOR and discrimination." This led to HYBE’s audit of ADOR’s management and Min’s press conference. If Min’s contract breach is recognized, HYBE could acquire Min’s shares at the par value of about 30 million won (5,000 won per share).
Meanwhile, on the 14th, HYBE claimed, "ADOR’s management gained unfair profits using undisclosed information ahead of the audit." ADOR’s close aide, Vice President A, sold all 950 HYBE shares held on the 15th of last month for 203.87 million won, and the next day, Min’s side sent emails to HYBE’s management raising various suspicions about HYBE. Subsequently, HYBE launched a surprise audit of ADOR citing "management rights takeover suspicions." HYBE’s view is that Vice President A sold shares in advance anticipating a stock price drop due to the upcoming public opinion battle.
HYBE also plans to request an investigation by the Financial Supervisory Service, alleging that Min and other ADOR executives spread "false information" related to HYBE, causing investor losses. Min’s side completely denies these allegations.
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