Namyang Dairy Files Injunction to Prohibit Real Estate Disposal
Forest Residence Owned by Jeong Yong-jin, Lee Seo-hyun, and Others
Ongoing Compensation Dispute with Hahn & Co.
Former Namyang Dairy Products Chairman Hong Won-sik was found to have abused his director position to purchase a company-owned luxury resort just before starting a management rights dispute with Hahn & Company in 2021. This follows a recent illegal ruling on 'self-determined compensation' and now a 'self-approved sale.' As Namyang Dairy Products begins procedures to reclaim ownership of the resort from former Chairman Hong, various lawsuits are piling up against him, who has already lost management rights.
According to industry sources on the 12th, the court recently approved Namyang Dairy Products' injunction request on April 7th to prohibit the disposal of real estate filed against former Chairman Hong. Namyang Dairy Products is preparing to nullify the ownership registration transferred to Hong and reclaim the title. As a result, Hong is now unable to sell the property.
The property in question is the Forest Residence within Yongpyong Resort, Pyeongchang-gun, Gangwon-do, with 285.35㎡ on the first floor and 302㎡ on the second floor. The resort became famous after being purchased by notable figures such as Shinsegae Chairman Chung Yong-jin, former Nature Republic CEO Chung Woon-ho, and Samsung C&T President Lee Seo-hyun.
Namyang Dairy Products acquired this resort in 2008, and former Chairman Hong is known to have used it as a family villa. Later, in May 2021, after signing a stock purchase agreement with Hahn & Company, Hong had the board approve the sale of the resort to himself. According to the real estate registry, Hong purchased it in July of the same year for 3.44 billion KRW.
The problem lies in the illegality of Hong's self-approved sale. As the subject of the real estate sale, Hong had a conflict of interest and was not allowed to exercise voting rights at the board meeting. Under commercial law, self-dealing transactions require approval from two-thirds of the directors excluding the interested party. Nevertheless, Hong cast a favorable vote, resulting in four out of six directors approving the sale.
Excluding Hong, only three out of five directors approved, which likely would have led to rejection. Furthermore, this self-dealing transaction, a major resolution, was omitted from the 2021 business report.
Last month, the court ruled that Hong's approval to increase his own salary cap at the shareholders' meeting in March last year was illegal and ordered the cancellation of the approval. This also constitutes a conflict of interest. As more cases of Hong abusing his board position for self-approval emerge, Namyang Dairy Products is expected to continue investigations related to this matter.
Although the 60-year management by the Hong family ended with a Supreme Court ruling earlier this year, former Chairman Hong continues to engage in legal battles with Namyang Dairy Products and Hahn & Company. Hahn & Company has filed a damages lawsuit worth around 50 billion KRW, claiming Hong failed to fulfill the stock purchase agreement in a timely manner.
A Namyang Dairy Products official stated, "Since the lawsuit is ongoing, we cannot comment further."
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