NewJeans has few options after Ador rejects group's request to reinstate Min Hee-jin as CEO

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

"The board has resolved to convene an extraordinary shareholders' meeting to reappoint Min Hee-jin as an internal director," Ador said in an official statement. "However, the board cannot accept the request for her reinstatement as CEO at this time. Min Hee-jin's role and authority as the producer for NewJeans are fully guaranteed, and further discussions on specific terms will take place in the future."

Min immediately issued a press release, once again requesting her reinstatement as CEO to ensure the continued success and performance of the artists under her guidance.

Ador's decision leaves NewJeans with limited options. The group must either remain at Hybe under the leadership of the new Ador CEO Kim Ju-young, find legal grounds for contract violations to take action and part ways, or pay a substantial penalty to terminate its contract and work with Min outside of Ador.

On Sept. 11, NewJeans broke their silence on the ongoing dispute between Min and Hybe, stating, "What we want is for Ador to return to its original state, with (former) CEO Min Hee-jin overseeing both management and production. We believe this is the way to coexist peacefully with Hybe without conflict."

The statement is seen as a strategic move, likely preparing for potential legal action. Before filing an injunction to suspend the group's exclusive contract, NewJeans appears to be giving Hybe, who they consider the liable party, a chance to correct any violations.

According to Article 15 of the Standard Contract for Popular Culture and Arts Professionals, proposed by the Fair Trade Commission, if either the "agency" or the "artist" breaches the contract, the other party may request the breach be corrected within 14 days. If the breach is not rectified within this period, the contract may be terminated and damages may be claimed. This is why NewJeans set a deadline of Sept. 25, two weeks after their live broadcast on Sept. 11, for a response from Hybe.

However, even if NewJeans pursues a contract termination lawsuit after 14 days, basing its case on Min’s dismissal may not be sufficient.

“NewJeans is likely to argue for a suspension of the contract's validity based on Ador’s failure to meet its obligations or a breakdown in the trust relationship. However, it is difficult to claim that Ador has violated key contractual obligations, such as payment settlements,” said Lee Jae-kyoung, a professor at Konkuk University Law School and president of the Korea Entertainment Law Society, on Wednesday. “NewJeans' request for Min’s reinstatement as CEO would interfere with management decisions, which may not be a legally persuasive argument in court.”

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

The exact penalty amount is unknown, as the details of NewJeans’ contract have not been publicly disclosed. However, according to the Ministry of Culture, Sports, and Tourism’s standard exclusive contract, penalties are calculated based on the artist’s average monthly sales over the past two years, multiplied by the remaining months in the contract.

NewJeans is believed to have about five years left in the contract and Ador’s revenue over the past two years is estimated to be around 190 billion won. This places the penalty for termination in the range of 450 billion to 500 billion won, making contract termination a financially challenging route.

However, music critic Lim Hee-yun believes paying the penalty might be the easiest solution if the band insists on its original request.

“Just as G-Dragon joined Galaxy Corporation, a relatively unknown IT company, it’s possible that a wealthy, random company could step in and take them on,” Lim said Wednesday.