Lawsuit Filed Against Company in Court on 30th Last Month
Amounting to 6.54% of Equity Capital
Additional Legal Battles Continue After Transfer of Management Rights
Former Namyang Dairy Products Chairman Hong Won-sik has filed a lawsuit against the company claiming over 44 billion KRW in severance pay.
Namyang Dairy Products announced on the 12th that Hong filed a lawsuit on the 30th of last month at the Seoul Central District Court’s 41st Civil Division, demanding payment of 44,357,754,000 KRW as severance pay. The amount sued corresponds to 6.54% of Namyang Dairy Products’ equity based on last year’s consolidated financial statements. The defendant in this lawsuit is Kim Seung-eon, CEO of Namyang Dairy Products.
Hong’s side requested the defendant to pay the amount calculated at an annual interest rate of 5% from May 6 until the date of service of the copy of the complaint, and at an annual interest rate of 12% from the following day until the severance pay is fully paid.
Namyang Dairy Products stated, "The lawsuit amount was arbitrarily calculated and demanded by Hong’s side, and the specific basis is unknown," adding, "The company plans to actively respond through legal procedures."
Earlier this year, following a Supreme Court ruling, Hong transferred all his shares in the company to the private equity firm Han & Company (Han & Co). However, additional lawsuits are ongoing over damages incurred during the period awaiting the Supreme Court’s final decision.
A notable case is the 'Cancellation of Shareholders’ Meeting Resolution' lawsuit filed by Shim Hye-seop, auditor of Namyang Dairy Products, against the company. Previously, at the regular shareholders’ meeting held in March last year, Hong voted in favor of a resolution setting the director remuneration limit, including his own, at 5 billion KRW. The lawsuit was filed on the grounds that it is illegal for a shareholder who is also an executive of the company to decide the remuneration limit for directors including himself. It is argued that exercising voting rights by a person with a conflict of interest constitutes a 'conflict of interest.' On the 31st of last month, the first-instance court ruled in favor of the plaintiff, resulting in Hong not receiving his remuneration for last year.
The approximately 17 billion KRW in remuneration and severance pay that Hong was scheduled to receive this year is also expected to be recalculated. If the director remuneration limit is reset, the monthly salary Hong set for himself just before retirement will also need to be recalculated. Given that Hong has left the company, it is unlikely that Namyang Dairy Products will appeal on his behalf.
Han & Co has also filed a lawsuit seeking damages in the 50 billion KRW range, claiming that Hong failed to fulfill the stock purchase agreement he signed in 2021 in a timely manner.
Meanwhile, at the shareholders’ meeting held in March, key figures from Han & Co entered the board of directors in large numbers, and the company introduced an executive officer system, appointing Kim Seung-eon, the management controller, as the representative executive officer (CEO). Hong’s children, Executive Directors Hong Jin-seok and Hong Beom-seok, resigned as of April.
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