Yanggu Lee, Former Chairman of DongSung Pharmaceutical.
On December 17, Brand Refactoring raised suspicions that, amid the prolonged management dispute and rehabilitation proceedings surrounding DongSung Pharmaceutical, only external investors who actually injected capital and ordinary shareholders are bearing the risk of losses, while the former owner’s family continues to maintain influence through structurally connected interests.
The company argued that this issue is not simply a “management dispute,” but rather a transaction in which external investors were belatedly included in a structure already designed among family members.
According to Brand Refactoring, “The relevant documents show that former Chairman Yanggu Lee, his older sister Kyunghee Lee, and his nephew, former CEO Wonkyeon Na, had established a structure that allowed shares and management rights to circulate within the family even before the rehabilitation process, through multiple prior agreements such as a comprehensive proxy for voting rights, memoranda of waiver for management and voting rights, and share transfer contracts.” The company also presented evidence suggesting that the family shared financial interests through derivatives trading, placing them in a relationship akin to a “community of fate.”
Brand Refactoring further pointed out, “If the profit and loss structure was intertwined not only through share contracts but also through derivatives transactions, there is a strong basis to consider this a joint family interest rather than that of individuals.” If this structure is factual, it suggests that the family members likely shared the same interests in major decision-making and during the rehabilitation phase of DongSung Pharmaceutical.
In this context, in April of this year, former Chairman Yanggu Lee signed a contract to transfer approximately 3.68 million shares (14.12%) of DongSung Pharmaceutical and management rights to Brand Refactoring. Under this contract, Brand Refactoring actually paid over 10 billion won, and according to disclosure and civil complaint documents, a total of about 11.6 billion won was transferred.
Brand Refactoring stated that it entered into the transaction without fully recognizing the pre-existing family contracts and the structure of shared financial interests. As a result, the company claims that prior family agreements and subsequent third-party transactions have clashed, raising suspicions of double selling and fraudulent transactions.
After the share acquisition, DongSung Pharmaceutical entered a period of severe turmoil, including the filing for rehabilitation, a transition to a court-appointed administrator system, reports of embezzlement and breach of trust against former management, and the pursuit of M&A before approval. The stock price plummeted, and concerns over maintaining its listing grew due to trading suspensions and the accumulation of penalty points for improper disclosures.
Brand Refactoring emphasized, “The shares of Brand Refactoring and minority shareholders, who actually invested capital, are effectively tied up amid rehabilitation risks. In contrast, suspicions have been raised that former Chairman Yanggu Lee and his family, through previously signed contracts and the structure of joint interests formed by derivatives, are maintaining the possibility of regaining access to management rights and shares depending on future developments.”
DongSung Pharmaceutical was contacted for comment but did not respond.
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