[Exclusive] "Hong Won-sik suffers two consecutive defeats": Namyang Dairy account provisional attachment order cancelled

[비즈한국] Former Namyang Dairy003920 Chairman Hong Won-sik has recently faced consecutive losses in his asset freeze dispute with Hahn & Company (Hahn & Co.), the largest shareholder of Namyang Dairy. Both sides are currently engaged in lawsuits regarding damages for the delay in transferring Namyang Dairy shares and a claim for retirement benefits, and in connection with these, they have each attempted to freeze assets through provisional attachments.

Former Namyang Dairy Chairman Hong Won-sik (pictured) has recently suffered consecutive defeats in an asset freeze battle against Hahn & Company (Hahn & Co.), a private equity firm that has become the largest shareholder of Namyang Dairy. Photo = Reporter Lim Jun-seon

On the 10th, the Seoul Central District Court granted Namyang Dairy's objection to the provisional attachment, ordering the cancellation of the attachment on the company's bank accounts. Previously, former Chairman Hong Won-sik filed a lawsuit against Namyang Dairy for retirement benefits this May, and in September, he provisionally attached the company’s deposit receivables, which serve as Namyang Dairy’s operating accounts. The amount claimed by Hong for retirement benefits was 44.357754 billion KRW, and he sought a provisional attachment for 30 billion KRW of that amount. The court had initially granted the attachment for 17 billion KRW, leading to a partial freeze of Namyang Dairy's accounts.

The cancellation of this provisional attachment stems from false statements made by former Chairman Hong Won-sik. While applying for the attachment regarding his retirement benefit lawsuit, Hong stated to the court that "there are no properties owned by Namyang Dairy that can be easily attached." However, the court determined that Hong, who had worked at Namyang Dairy since 1977, was well aware of the real estate owned by the company and had submitted a false affidavit. Generally, the attachment of liquid assets like bank deposits imposes greater restrictions on ownership compared to real estate.

The court ruled, "As the creditor served as an executive of the debtor company for about 50 years, he appeared to be well aware of the existence of real estate owned by the debtor that could be easily attached, yet he submitted a false affidavit for the provisional attachment. Considering that there is no apparent necessity to attach the deposit receivables—which are the debtor's main operating accounts—due to the existence of easily attachable real estate or the external accumulation of executive retirement funds, this application for provisional attachment lacks sufficient demonstration of the necessity for preservation."

Former Chairman Hong Won-sik is the eldest son of the late Hong Doo-young, founder of Namyang Dairy. After graduating from college, he joined Namyang Dairy in March 1977 and led the company for 47 years until his term as director expired this March. In 2021, after Namyang Dairy faced public backlash for exaggerating that its dairy product, Bulgaris, had anti-COVID-19 effects, he stepped down from the chairmanship in May of the same year and sought to sell the company's management rights.

In May 2021, Hahn & Co. signed a contract to acquire all 380,000 shares (53%) held by the family of former Chairman Hong Won-sik. However, in September of that year, Hong’s side notified the termination of the contract, claiming that "Hahn & Co. unfairly interfered with company management." Hahn & Co. resisted by filing for an injunction to prohibit the disposal of shares and a lawsuit to compel the transfer of shares. This legal battle ended with a victory for Hahn & Co. at the Supreme Court this January. At the end of January, three years after the sales contract, Hong's side transferred the Namyang Dairy shares to Hahn & Co.

Regarding the delay in the share transfer, Hahn & Co. is currently pursuing a 50-billion KRW damages lawsuit against Hong. After filing the lawsuit in November 2022, they provisionally attached Hong's claim for the Namyang Dairy sales proceeds in January this year, based on the damages receivable. Hong appealed the provisional attachment, but his request was dismissed in May of this year, and his subsequent appeal was rejected on the 9th. Including the cancellation of the Namyang Dairy account attachment on the 10th, former Chairman Hong has suffered consecutive defeats against Hahn & Co. in the battle over frozen assets in just two days.