Shareholder Agreements & Trust: Court Narrowly Defines Breakdown of Trust

A South Korean court ruling on February 12, 2026, has sided with Min Hee-jin, the former CEO of ADOR, in her contract dispute with HYBE, the parent company of the K-pop group NewJeans. The court ordered HYBE to pay Min 25.5 billion won ($17.7 million) related to a put option agreement, a decision that appears to shift momentum in her favor in a broader legal battle that began in April 2024.

The core of the dispute revolved around HYBE’s attempt to terminate the shareholder agreement between the company and Min Hee-jin. The court found this termination to be invalid. While the court acknowledged that Min Hee-jin did seek ways to weaken HYBE’s control and independently control ADOR, it determined that these actions, on their own, did not constitute a material breach of the shareholder agreement.

This ruling is significant because it hinges on a narrow interpretation of what constitutes a “breakdown of trust,” a common prerequisite for terminating shareholder agreements. According to industry observers, the court appears to have interpreted the breakdown of trust…very narrowly. This suggests that simply attempting to gain more independence, even if it challenges the existing power structure, is not automatically grounds for contract termination.

Shareholder Agreements and the Importance of Trust

Shareholder agreements are crucial instruments in closely held corporations, designed to manage risk, guide governance, and provide a framework for resolving disputes. They become particularly important when shareholders disagree on the direction of the company, potentially leading to deadlock and stifled decision-making. These agreements can outline mechanisms for addressing such impasses, protecting minority shareholder rights, and establishing procedures for shareholders who wish to exit the business.

A key element often included in these agreements is the concept of a “breakdown of trust.” This clause typically allows for the termination of the agreement if one party believes the other has acted in a way that fundamentally undermines the basis of their partnership. However, as this case demonstrates, courts are likely to scrutinize such claims carefully, requiring concrete evidence of a serious breach of faith.

Put Options and Financial Implications

The court’s decision centers on a put option agreement, a contractual right allowing Min Hee-jin to sell her shares back to HYBE at a predetermined price. HYBE’s attempt to invalidate the shareholder agreement was, in effect, an attempt to avoid fulfilling its obligation under this put option. By upholding the validity of the put option, the court has compelled HYBE to pay Min Hee-jin 25.5 billion won.

The financial implications of this ruling extend beyond the immediate payout. Some industry voices have warned that the court’s narrow interpretation of “breakdown of trust” could negatively affect investment in the entertainment business. Investors may become more hesitant to enter into shareholder agreements if they perceive a greater risk that their rights will be challenged or that the agreements will be difficult to enforce.

Impact on Ongoing Lawsuits and NewJeans Fans

While this ruling represents a win for Min Hee-jin, analysts caution that it doesn’t necessarily guarantee success in other ongoing lawsuits against HYBE. However, it does strengthen her position and provides a favorable precedent. The court’s decision specifically addressed the validity of the put option and the termination of the shareholder agreement, but other legal claims may hinge on different evidence and legal arguments.

Interestingly, the ruling may have come at a cost to Min Hee-jin’s reputation among fans of the K-pop group NewJeans. She had previously framed her dispute with HYBE as a fight for NewJeans, but the court’s finding that her actions were aimed at gaining independence from HYBE appears to have undermined that narrative. According to reports, her whole ‘for NewJeans’ argument has lost all power.

The Role of Shareholder Agreements in Corporate Governance

This case underscores the importance of carefully drafting shareholder agreements that clearly define the circumstances under which the agreement can be terminated. Clauses addressing dispute resolution, deadlock situations, and exit strategies are crucial for protecting the interests of all parties involved. Without such agreements, corporations risk becoming mired in costly and protracted legal battles.

As one legal director notes, shareholder agreements can provide mechanisms to address deadlock, protect the voice and rights of minority shareholders, provide a road map for when shareholders no longer want to be involved in the business and prevent abuses of power. The absence of such an agreement can leave corporations vulnerable to stalemate and dysfunction.

The ruling in the Min Hee-jin vs. HYBE case serves as a reminder that courts will likely take a cautious approach when interpreting clauses related to “breakdown of trust” in shareholder agreements, requiring a high degree of proof before allowing for contract termination. This outcome may encourage parties to more precisely define the conditions that would trigger such a clause in future agreements.