Lotte Family Fued Continues with a Japan Court Derivative Action Against Chairman and Senior Management of Lotte Holdings

Mr. Dong-joo SHIN, the former Vice Chairman of Lotte Holdings and current Chairman of SDJ Corporation, filed a derivative action targeting his younger brother, Mr. Dong-bin SHIN, the incumbent Chairman of Lotte Holdings, along with several senior executives of Lotte. The lawsuit, a shareholder derivative action, was filed in a Tokyo District Court on July 4.

According to reports in The Yomiuri Shimbun, Mr. Shin is seeking c. 14.4 billion yen (equivalent to around 136 billion Korean won) in damages on behalf of the company. The complaint names six individuals, including Chairman Shin, and alleges that their management decisions resulted in reputational and financial harm to the corporation.

Mr. Shin contends that the company’s leadership failed in their fiduciary duties by inadequately responding to the criminal conviction of Chairman Shin, who was found guilty in a bribery case involving former South Korean President Park Geun-hye. Mr. Shin, in short, argues that this failure has materially damaged Lotte Group’s corporate image and exposed the company to broader legal, compliance, and other financial risks.

Under Japanese corporate law, a shareholder derivative suit enables a shareholder to file a lawsuit in the name of the corporation against its directors or officers for alleged misconduct or breach of duty, with the aim of recovering losses on behalf of the company. The major dispute is over control of the company and its subsidiaries. Former Vice Chairman Shin has been attempting to return to his position since being dismissed as Vice Chairman of Lotte Holdings Japan in 2015. At the Lotte Holdings regular shareholders’ meeting held in Tokyo on the 27th of last month, the motion to appoint former Vice Chairman Shin as a director of Lotte Holdings was rejected.

In a press conference held shortly after filing the suit, Mr. Shin emphasized his intention to “clarify accountability within the organization” and expressed his objective to “pursue the normalization of Lotte’s management.”

We will update the reader when more information becomes available.

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