NewJeans is left with few options after Ador rejected the group’s request to reinstate Min Hee-jin as CEO

Ador, the K-pop agency behind NewJeans and a subsidiary of Hybe, confirmed Wednesday that it will not honor the girl group’s request to reinstate former CEO Min Hee-jin. The agency cited its adherence to the Hybe principle of separation of management and production. Ador, however, said Min may continue to serve as internal director and producer of NewJeans.

“The board has decided to convene a special meeting of shareholders to reappoint Min Hee-jin as internal director,” Ador said in an official statement. “However, the board cannot accept the request to reinstate her as CEO at this time. Min Hee-jin’s role and authority as the manufacturer of NewJeans are fully guaranteed, and further discussions on specific terms will take place in the future.”

Min immediately issued a press release reiterating her request to be reinstated as CEO to ensure continued success and performance for artists under her leadership.

Ador’s decision leaves NewJeans with limited options. The group must either remain in Hybe under the leadership of new Ador CEO Kim Ju-young, find a legal basis for breach of contract to take action and part ways, or pay a significant penalty to terminate the contract and cooperate with Min outside Ador.

On September 11, NewJeans broke its silence on the ongoing dispute between Min and Hybe, stating: “We want Ador to return to its original state with (former) CEO Min Hee-jin overseeing both management and production. I believe this is a way to coexist peacefully with Hybe, without conflict.”

The statement is seen as a strategic move, possibly preparing for potential legal action. Before making an order suspending the group’s exclusivity agreement, NewJeans appears to be giving Hybe, which it considers the liable party, a chance to remedy any breaches.

Pursuant to Art. 15 of the Standard Contract for Specialists in Popular Culture and Art, proposed by the Fair Trade Commission, if an “agency” or “artist” breaches the contract, the other party may demand that the breach be removed within 14 days. If the breach is not remedied within this period, the contract may be terminated and damages may be claimed. That’s why NewJeans has set a deadline for a response from Hybe of September 25, two weeks after the 9/11 livestream.

However, even if NewJeans files a lawsuit to terminate the contract after 14 days, relying on Min’s dismissal may not be enough.

“NewJeans will likely argue for a stay of the contract due to Ador’s failure to honor her obligations or breach of the fiduciary relationship. However, it is difficult to argue that Ador has breached key contractual obligations such as settlement of payments,” Lee Jae-kyoung, a professor at the Faculty of Law of Konkuk University and president of the Korea Entertainment Law Society, said on Wednesday. “NewJeans’ request to reinstate Min as CEO would conflict with the board’s decisions, which may not be a legally persuasive argument in court.”

Another option for NewJeans is to terminate the contract by paying a fine, which is reported to be between 300 billion won ($225.8 million) and 500 billion won.

The exact amount of the fine is not known because the details of the NewJeans contract have not been made public. However, according to the standard exclusivity contract of the Ministry of Culture, Sports and Tourism, penalties are calculated based on the artist’s average monthly sales from the last two years multiplied by the remaining months of the contract.

NewJeans is believed to have about five years left on its contract, and Ador’s revenue over the past two years is estimated at about 190 billion won. This means that the termination penalty ranges from 450 billion won to 500 billion won, making termination a financial challenge.

However, music critic Lim Hee-yun believes that paying the fine may be the easiest solution if the band persists with its original request.

“With G-Dragon joining Galaxy Corporation, a relatively unknown IT company, it is possible that a rich, random company will step in and acquire them,” Lim said on Wednesday.