Demotion of Hanmi Pharmaceutical CEO Ends in Failure... 'Professional Management System' at the Core of Mother-Son Conflict

Holding Company Demoted to President and Executive Director of Hanmi Pharm
Hanmi Pharm "Maintains President Park Jaehyun's Leadership"
Mother and Daughter Push for Replacement of Holding Company CEO Lim Jonghoon

The third round of the mother-son and sibling management rights battle at Hanmi Pharm has ignited.

On the 28th, Lim Jong-hoon, CEO of Hanmi Science, the holding company of Hanmi Pharm Group, demoted Park Jae-hyun, CEO of Hanmi Pharm, from president to executive director and reduced his responsibilities from overall management to manufacturing headquarters. In response, Hanmi Pharm announced the next day that "Hanmi Science's personnel appointment of the CEO of Hanmi Pharm, a separate legal entity, is illegal and invalid," and stated that "the Park president system will be maintained without change." This marks a direct confrontation between the holding company and the main operating company over the CEO's position.

The management rights dispute at Hanmi Pharm began in January when Song Young-sook, chairwoman of Hanmi Pharm Group, and Lim Joo-hyun, vice chairman of Hanmi Science, a mother-daughter duo, announced a merger with OCI Group to prepare for inheritance tax. Song’s sons, Lim Jong-yoon and Jong-hoon, the brothers, opposed this and won the management rights by defeating the mother-daughter faction in the Hanmi Science regular shareholders' meeting on March 28, marking their victory in the "first round." Subsequently, the brothers moved to directly seize management control. The younger brother Jong-hoon ousted their mother and was appointed CEO of Hanmi Science, while the elder brother Jong-yoon initially took the position of inside director at Hanmi Science and was scheduled to become CEO of Hanmi Pharm later.

However, the mother-daughter faction exercised the casting vote at the regular shareholders' meeting and turned Shin Dong-guk, chairman of Hanyang Precision, who had sided with the brothers, to their side in early last month, forming a "three-party alliance" to secure a majority stake and reverse the situation in the "second round." The three-party alliance then announced plans to introduce a system entrusting group management to professional managers. According to the pharmaceutical industry on the 30th, the three-party alliance plans to replace Lim Jong-hoon, CEO of Hanmi Science, with an external expert to transition to a professional management system.

To this end, the three-party alliance requested the convening of an extraordinary shareholders' meeting of Hanmi Science at the end of last month, but the Hanmi Science board, controlled by the brothers who secured a majority after the first round victory, refused to convene it. Industry insiders interpret Hanmi Science’s attempt to demote President Park as resistance to the three-party alliance’s attempt to replace CEO Lim Jong-hoon. President Park is a close aide of Chairwoman Song Young-sook and a pharmaceutical PhD professional manager who has overseen new drug research and development, making him a key figure in the professional management system envisioned by the three-party alliance. A pharmaceutical industry insider said, "The family dispute is shaking even the management with pharmaceutical expertise, raising concerns about weakening Hanmi Pharm’s research and development competitiveness."

On the 28th, just one hour before the holding company issued the demotion of President Park, Hanmi Pharm established a personnel team and legal team within the management headquarters, and decided to operate this organization independently. Until now, Hanmi Pharm had outsourced personnel and legal affairs to Hanmi Science, but from now on, it intends to operate independently under President Park’s supervision, excluding the brothers’ influence.

The "third round," triggered by Lim Jong-hoon, CEO of Hanmi Science’s attempt to demote President Park, is expected to unfold with a flood of legal responses. Hanmi Science maintains that the personnel authority exercised over President Park is valid and is reportedly considering filing a lawsuit against Hanmi Pharm to enforce the personnel decision. Additionally, the brothers, who currently control the Hanmi Science board, are pushing to raise funds for inheritance tax payment through third-party allotment rights offerings and convertible bond (CB) issuance, but the three-party alliance has declared, "If they proceed, we will take legal action."

The three-party alliance also announced on the 30th that if the Hanmi Science board continues to refuse to convene an extraordinary shareholders' meeting, they plan to file a petition with the court to permit the convening of the meeting. Hanmi Pharm Group management believes that courts generally approve petitions for extraordinary shareholders' meetings submitted by shareholders who meet the requirements. If the court permits the extraordinary shareholders' meeting, a fierce battle to secure the votes of minority shareholders is expected to ensue again. The three-party alliance wants to increase the number of board members to regain a majority on the Hanmi Science board, as their current stake alone is insufficient.