Hanmi Pharma Control Fight Enters New Phase

The management dispute at Hanmi Pharmaceutical Group has been ongoing for over two and a half years, with little resolution in sight. At the heart of the conflict are differing opinions on the approach to fund the inheritance tax and control over the board of directors. The dispute began after the death of founder and former Chairman Lim Sung-ki in 2020, which led to a substantial inheritance tax.

The mother-daughter faction, led by Chairperson Song Young-sook and Vice Chairperson Lim Ju-hyun, advocated for an integration with OCI Group to secure funds for the tax and stabilize management. However, the brothers’ faction, consisting of Lim Jong-yoon and Lim Jong-hoon, vehemently opposed this move, leading to a legal battle and a contentious vote at the shareholders' meeting.

After an initial setback, the brothers’ side gained the upper hand at the shareholders' meeting in March. Yet, a new phase of the dispute has emerged, with the restructuring of the major shareholder alliance. The mother-daughter side has formed a 'three-party alliance' with Hanyang Precision Chairman Shin Dong-guk, aiming to alter the articles of incorporation and increase the board's size from nine to eleven members.

This move is seen as an attempt to regain control of management by undermining the brothers’ side, who currently hold the majority. Lim Jong-hoon, CEO of Hanmi Science, has vowed to complete his term as representative director until 2026, signaling strong resistance against any changes.

The brothers’ side sees this attempt as a usurpation of management rights and remains firmly opposed. The conflict has now reached a critical juncture, particularly concerning the composition of the Hanmi Science board of directors. Both sides anticipate a bitter battle for the support of minority shareholders once a special resolution for board expansion is required.

While the mother-daughter faction favors a comprehensive solution to the inheritance tax, which stands at around 540 billion won (approximately $415 million) and remains unpaid, the brothers’ side insists on paying the tax through personal financing or by leveraging stock-collateralized loans.

Additionally, there is a fundamental disagreement on the introduction of a professional management system. The three-party alliance advocates for separating ownership from management to increase transparency, whereas the brothers’ side believes in owner-led responsible management for long-term projects like drug development. The personal and organizational restructuring within Hanmi Pharmaceutical has intensified employee fatigue, and the prolonged dispute is affecting the company's decision-making speed.

As the management conflict drags on, there is growing concern over the decline in Hanmi Pharmaceutical's corporate value, as investors set more conservative targets due to the uncertainty surrounding governance.

The outcome of this situation will be determined at the upcoming extraordinary general meeting of shareholders, where the crucial question will be whether the three-party alliance can secure a majority on the board to reshape management control, or if the brothers’ side will prevail in preserving the existing system. Regardless of the result, the management dispute's impact on organizational integration and the resolution of the inheritance tax issue remains a significant challenge for Hanmi Pharmaceutical.