A ruling in the appellate court found that Hong Won-sik, former chairman of NAMYANG DAIRY PRODUCTS, engaged in illegal "self-approval of remuneration limits." The initial trial's verdict that deemed the remuneration limit resolution invalid was upheld in the second trial.
On the 22nd, the 12-1 Civil Division of the Seoul High Court upheld the first trial's judgment that favored the plaintiff, ruling out Hong's appeal in a lawsuit filed by Shim Hye-seop, an auditor at NAMYANG DAIRY PRODUCTS, against the company to revoke the shareholders’ meeting resolution.
This lawsuit was initiated when Auditor Shim claimed there was an issue with agenda item 6, concerning the remuneration limits for directors, at the 2023 NAMYANG DAIRY PRODUCTS regular shareholders' meeting. If the resolution is deemed significantly unfair, the auditor can file a lawsuit for revocation within two months from the date of the resolution.
At that shareholders' meeting, the remuneration limit for directors was set at 5 billion won, and it became an issue that Hong, a majority shareholder and internal director, voted in favor of his own remuneration limit resolution.
Article 368, Section 3 of the Commercial Act stipulates that "a person with a special interest regarding the resolution of the general meeting cannot exercise their voting rights."
Previously, in May last year, the first trial court pointed out that Hong was a stakeholder who could not exercise voting rights yet cast a vote in favor, leading to a ruling that annulled the resolution. If the decision is confirmed in the appellate court, Hong's severance pay may significantly decrease from 17 billion won, which made his appeal inevitable.
Later, Hong participated in the trial through an independent party's application and appealed. In this case, Auditor Shim is the plaintiff while NAMYANG DAIRY PRODUCTS, currently majority-owned by Hahn & Company, is the defendant; however, the individual most affected by the judgment is Hong.
However, the appellate court rejected Hong's appeal and ruled the shareholders' meeting resolution as invalid. The court deemed Hong's application to participate as an independent party unlawful, concluding the trial without deliberation. The first trial ruling was maintained, reaffirming the victory of plaintiff Auditor Shim.
An industry insider interpreted that "this ruling serves as a wake-up call against the practice of dominant shareholders setting their excessive salaries through 'self-approval.'"