[Edaily Reporter Kim Seung-kwon ] IlyangPharmaceutical(007570)has successfully resolved a long-standing dispute with its Chinese joint venture, reaping economic gains of approximately 68 billion won, and has now begun in earnest to rebuild its business in China.

China’s Supreme People’s Court selected this case as one of the “Top Five Exemplary Cases for the Protection of Foreign Investors’ Rights and Interests.” Chief Justice Zhang Jun personally highlighted it as a representative case in his work report to the National People’s Congress, and it is regarded as a precedent demonstrating China’s judicial commitment to protecting the legitimate rights of foreign investors.

Expanding Investment in Chinese Subsidiary, Commencing First Exports of “Won-B-D”

The dispute was triggered by the trademark rights to IlyangPharmaceutical’s flagship brand, “Wonbi-D.” Although the trademark had been transferred to the joint venture to prevent counterfeiting and secure recognition as a Chinese geographical indication trademark, the conflict arose when the Chinese side suspended dividend payments, citing factory expansion and reinvestment, and even refused to import Korean ginseng concentrate, thereby attempting to operate independently.

In response, IlyangPharmaceutical implemented a comprehensive strategy that went beyond simply claiming dividends to include concurrent civil, criminal, and administrative actions. Specifically, the company: △ filed a lawsuit to claim dividends and requested access to accounting records; △ simultaneously filed lawsuits to terminate the joint venture agreement and recover capital contributions; and △ sought to prove the Chinese side’s abuse of rights and the resulting management deadlock.

As a result, a Chinese court issued an unprecedented ruling, directly calculating the dividend amount based on the audit report and shareholding ratios and ordering its payment. After overcoming obstacles in the overseas remittance process—including tax filings and approval from SAFE (State Administration of Foreign Exchange)—the company successfully repatriated approximately 18 billion won in undistributed profits to South Korea without incurring any losses.

Achievements in recovering intellectual property rights were also notable. A total of 29 trademarks—including those previously transferred to the joint venture as well as defensive trademarks filed by the Chinese side—were recovered free of charge, and one patent and three registered health food technologies were also secured.

In addition, the company recovered an additional 52 billion won through negotiations regarding compensation for damages resulting from the refusal to import raw materials, damages for trademark infringement, losses related to breach of trust and embezzlement, and legal fees. Combined with the 18 billion won in undistributed profits, this amounts to a total economic gain of 68 billion won.

Having fully regained management control, IlyangPharmaceutical immediately accelerated the reconstruction of its China operations. Centered on its Chinese subsidiary, IlyangPharmaceutical (Jilin) Co., Ltd., the company formulated an investment plan totaling 80 million yuan (approximately 17.6 billion won) and completed its initial capital injection.

At the same time, the company began its first export of “Wonbi-D” to China. This marks the first business achievement since fully regaining management control and operational leadership following the resolution of the dispute, and is viewed as the starting point for the normalization of its Chinese operations. Having fully secured the trademark rights, the company can now reduce costs associated with building a new brand and accelerate its sales and marketing efforts. Currently, the product is being supplied to the Chinese market as a general food item while expanding distribution channels, and the company plans to establish a local production system in the future to ensure price competitiveness and supply stability.

Allegations of Accounting Irregularities Dismissed by Prosecutors

The prosecution’s investigation into allegations of accounting violations and obstruction of external audits raised by financial authorities has also concluded. The Suwon District Prosecutors’ Office ruled that there were no grounds for charges and that the prosecution had no authority to indict regarding the process of incorporating the Chinese joint ventures “Tonghua Ilyang” and “Yangzhou Ilyang” as subsidiaries. This conclusion came approximately three months after the financial authorities notified the prosecution, confirming the company’s proper accounting practices and sound management through judicial proceedings.

An official from IlyangPharmaceutical stated, “The successful resolution of the dispute involving the Chinese joint ventures and the prosecution’s decision to clear the company of charges have once again proven our management transparency and corporate legitimacy,” adding, “The selection as a best practice by the Supreme People’s Court of China is a symbolic achievement recognizing the legitimate rights and interests of Korean companies overseas.” The spokesperson added, “Building on this restored trust, we will steadily expand our business in China and continue to enhance our R&D competitiveness and expand into global markets to increase our corporate value.”