'BODYFRIEND Management Dispute'...Court Says Removal of Han&Brothers as GP Was Lawful

[Financial News] A court has ruled that a partners' meeting resolution by the private equity fund on the side of BODYFRIEND's largest shareholder, which is involved in a management dispute, was lawful when it removed Han&Brothers from its role as general partner (GP).
The court found no procedural defects in the resolution process and said there were also grounds for dismissal, including conflicts of interest, under the fund's articles of incorporation.
The 30th Civil Division of the Seoul Central District Court, presided over by Judge Kim Seok-beom, ruled against Han&Brothers on the 27th in a lawsuit seeking to invalidate the partners' meeting resolution against Stonebridge Quantum No. 2 and No. 3 Private Investment Limited Partnerships. The court also dismissed the subsidiary claim seeking to overturn the resolution.
The case began when Han&Brothers and Stonebridge Capital established an investment partnership and became its general partner. The partnerships invested in a special purpose company, which then acquired a stake in BODYFRIEND and became the largest shareholder.
Later, on March 10, 2023, the partners of Stonebridge Capital and the investment partnerships unanimously passed a resolution to remove Han&Brothers as GP. The GP is the entity responsible for the fund's actual management, including investments, divestitures and the exercise of management rights. Han&Brothers effectively lost its status as the fund's manager.
Han&Brothers filed suit, arguing that there were defects in the convocation and removal procedures and that no grounds for dismissal existed under the articles of incorporation. It also claimed that the reasons for removal were not properly specified, depriving it of the right to defend itself, and that the resolution process violated relevant laws and regulations.
However, the court did not accept Han&Brothers' arguments.
The bench first said, "It is difficult to conclude that there were defects in the convocation or resolution procedures for this case." It then added that, as for the grounds for dismissal, "the facts discussed constitute violations of the relevant laws, the articles of incorporation and the agreement among the GPs."
Specifically, the court pointed to the appointment of the chief financial officer (CFO) without prior consultation or consensus procedures required under the agreement among the GPs. It also recognized as grounds for dismissal the appointment of the chairman without a board resolution from BODYFRIEND and the payment of compensation without a proper basis.
The court also noted that "there were significant conflicts of interest and transactions involving consulting and marketing contracts with unclear substance, as well as the receipt of compensation."
However, the court dismissed, without ruling on the merits, Han&Brothers' subsidiary claim seeking to cancel the partners' meeting resolution.
It said the Commercial Act does not provide a basis for filing an action to cancel a partners' meeting resolution in a limited partnership company.
After the first-instance ruling, Han&Brothers said it would "immediately appeal." It argued that it had already held prior consultations and gathered opinions, including interviews with the defendant's recommended candidates regarding the CFO appointment, that it retained decision-making authority, that no board resolution was required when the chairman took office, and that the consulting contracts were improper because they predated Han&Brothers' establishment.
It added, "These issues do not amount to serious grounds sufficient to remove the GP under the fund's articles of incorporation," and said it would "carefully review whether they also conflict with the intent of the prior injunction decision."
 

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