National Pension Service Decides 'Neutral' on Hanmi Science Voting Rights... Countdown to 'Plant Board'

Ongoing Management Dispute Between Siblings and Four-Party Alliance
'Neutral' Decision Likely to Split HanmiScience Board Evenly
Deadlock Imminent with 5-5 Board Composition

The National Pension Service (NPS) has decided to adopt a 'neutral' stance on exercising its voting rights at the HanmiScience shareholders' meeting on the 28th. Neutrality means that the NPS will exercise its voting rights in proportion to the approval and disapproval ratios of the other shareholders. With this decision, the entry of Shin Dong-guk, chairman of Hanyang Precision, into the board of directors is almost certain, signaling the imminent formation of a 'plant board' (a board unable to make decisions).

On the 26th, the NPS Fund Stewardship Responsibility Committee held its 14th meeting to review the direction of the NPS's voting rights on the agenda of HanmiScience's extraordinary shareholders' meeting. The committee decided to exercise a 'neutral' vote on the proposed amendment to the articles of incorporation to expand the number of directors from 'at least 3 and up to 10' to 'at least 3 and up to 11,' the appointment of Shin Dong-guk as an outside director, and the appointment of Lim Ju-hyun as an inside director.

Since early this year, HanmiScience has been embroiled in a 'family feud' over management rights involving the founder's sons, Lim Jong-hoon and Lim Jong-yoon, and the founder's wife, Song Young-sook, along with her daughter, former vice-chairman Lim Hyun-joo. In the March shareholders' meeting, the brothers secured a majority on the board and took control of management. Currently, out of the nine board members, five belong to the brothers' faction, and the remaining four are from the mother and daughter side.

The mother and daughter faction is attempting to seize control by forming a four-party alliance with the largest shareholder, Shin Dong-guk, chairman of Hanyang Precision, and the private equity fund La D?fense. At the shareholders' meeting on the 28th, the agenda includes increasing the board size from 10 to 11 members, appointing Shin Dong-guk as an outside director, and appointing Lim Ju-hyun as an inside director. The four-party alliance aims to overturn the balance with a 6-to-5 majority by increasing the board size to 11 and appointing two new directors through the amendment of the articles of incorporation.

Due to the subtle difference in shareholding ratios between the two sides, attention has focused on the NPS's voting rights. The NPS holds a 6.04% stake. According to industry sources, the combined shareholding of the four-party alliance is 49.42%, while the brothers hold 27.53%. Since the amendment to the articles of incorporation requires a special resolution, at least two-thirds of attending shareholders must approve it. Even with the NPS's 'neutral' decision, considering the brothers' stake, passing the amendment is practically difficult. However, regarding the appointment of directors, which requires a simple majority, the appointment of Chairman Shin Dong-guk is virtually confirmed due to the NPS's neutral stance. This is because a majority is achievable even considering some 'rebel votes' that occurred at the March shareholders' meeting.

If the amendment to the articles of incorporation fails and only Chairman Shin Dong-guk is appointed as a director, the board will be evenly split with five members on each side. Since neither side holds a majority, the board will become a 'plant board' unable to make any decisions. The brothers believe that even in a 5-to-5 situation, they can maintain management rights by simply 'holding out.' This is because in March 2025, the terms of three directors classified as part of the four-party alliance will expire, allowing the brothers to regain numerical superiority. The terms of the five directors from the brothers' faction expire in March 2027.