[비즈한국] It has been confirmed through BizHankook’s reporting that Namyang Dairy003920 and former Namyang Dairy Chairman Hong Won-sik have recently frozen each other’s real estate assets, with both sides seeking to protect their respective claims for damages and severance pay. Four years ago, former Chairman Hong sold the Namyang Dairy shares held by himself and his family to the private equity firm Hahn & Company. However, the two sides have since been embroiled in a legal battle, with claims involving severance pay and damages resulting from breach of trust during Hong’s tenure.
On the 3rd, the Seoul Central District Court granted the request for provisional attachment of real estate filed by former Namyang Dairy Chairman Hong Won-sik against Namyang Dairy. The attached property is the The Forest Residence condo at Yongpyong Resort in Pyeongchang-gun, Gangwon Province, held by Namyang Dairy, which is a two-story building (total floor area of 587㎡). Former Chairman Hong filed for the provisional attachment to secure 4 billion won in executive severance pay claims. Previously, in May of last year, he filed a lawsuit against Namyang Dairy for a total of 44.4 billion won in executive severance pay, and the litigation is currently ongoing.
The real estate provisionally attached by former Chairman Hong is an asset that Namyang Dairy recently recovered from him. In July 2021, former Chairman Hong purchased this condo, which was held by Namyang Dairy, for 3.44 billion won. This occurred two months after signing the contract to sell his Namyang Dairy shares to Hahn & Company. Subsequently, Hahn & Company, which took over the shares, filed a lawsuit claiming the sales contract was void, arguing that former Chairman Hong, who was the largest shareholder at the time, had sold company real estate without board approval. In May, the Seoul Northern District Court ruled that the contract was invalid, citing a violation of the Commercial Code’s regulations on "self-dealing by directors." Ultimately, the ownership of the condo returned to Namyang Dairy.
Namyang Dairy also provisionally attached former Chairman Hong Won-sik’s real estate on the same day, the 3rd. The intent is to secure 6 billion won out of the approximately 26.9 billion won in damages claims arising from illegal acts committed by the former chairman. The attached property is a three-story building (total floor area of 2,120㎡) owned by the former chairman in Yuseong-gu, Daejeon, which currently houses a church and commercial stores. Earlier this year, Namyang Dairy filed a lawsuit for damages based on illegal acts against former Chairman Hong, his wife (former advisor Lee Woon-kyung), and his sons (former managing directors Hong Jin-seok and Hong Beom-seok). Regarding this provisional attachment, Namyang Dairy stated, "It is a matter related to the breach of trust allegations that arose last year."
Former Chairman Hong Won-sik is currently facing a criminal trial for breach of trust. He is accused of receiving billions of won in kickbacks from suppliers in exchange for business dealings while running Namyang Dairy, and causing the company over 10 billion won in losses by inserting companies run by his relatives into the supply chain. Additionally, he faces charges of appointing a supplier representative as a company auditor and then reclaiming his salary, as well as using corporate cards for personal expenses. In December of last year, the prosecution arrested and indicted the former chairman on charges including breach of trust under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes. Following the court’s decision to grant his bail application in May, the former chairman is currently being tried without detention.
Former Chairman Hong Won-sik is the eldest son of the late Namyang Dairy founder Hong Doo-young and was the largest shareholder of Namyang Dairy until he transferred his shares to Hahn & Company in 2021. Former Chairman Hong joined Namyang Dairy in March 1977 and led the company for 47 years until his term as director expired in March of last year. In 2021, when Namyang Dairy faced public backlash for marketing its product 'Bulgaris' as if it had COVID-19 suppression effects, he stepped down from his position as chairman in May of that year and pushed for the sale of the company's management rights. At the time, the Namyang Dairy shares were divided among former Chairman Hong (51.68%), his wife Lee Woon-kyung (0.89%), his younger brother Hong Myung-sik (0.45%), and his grandson Hong Seung-ui (0.06%).
The private equity firm Hahn & Company is currently the largest shareholder of Namyang Dairy. In May 2021, Hahn & Company signed a contract to acquire a 52.63% stake in Namyang Dairy held by the family of former Chairman Hong for 310.7 billion won. However, when the former chairman’s side notified them of contract termination in September of that year, claiming "Hahn & Company unfairly interfered in company management," they filed a stock transfer lawsuit and finally won the case at the Supreme Court in January of last year. Three years after the sales contract, the former chairman's side transferred the Namyang Dairy shares to Hahn & Company in January of last year.
Hahn & Company is currently also engaged in a 50 billion won damages lawsuit against the former chairman regarding the delay in the transfer of Namyang Dairy shares. After filing the related lawsuit in November 2022, they provisionally attached the sales proceeds from Namyang Dairy due to the former chairman in January of last year based on the damages claims. Former Chairman Hong objected to this and filed an appeal against the provisional attachment, but it was dismissed in an appellate court in May of last year, followed by another dismissal in the re-appeal court in December of last year. The first-instance ruling on the damages lawsuit regarding the delay in stock transfer is scheduled to be released at the end of this month.