Officials of Samsung BioLogics Co. are heaving a sigh of relief as a South Korean court has approved its request for an injunction to put on hold the execution of penalties imposed by the financial watchdog for its alleged accounting fraud. Now they are shifting their focus to the administrative lawsuit the company has filed to prove the legitimacy of its accounting practice.
The biggest relief provided by the court’s decision announced on Jan. 22 is that Samsung BioLogics does not need to worry about the dismissal of CEO Kim Tae-han for the moment. Previously, the Securities and Futures Commission (SFC) recommended the company to fire its key executives, including the chief executive officer (CEO) and chief finance officer (CFO). Therefore, the company was expected to put the fate of CEO Kim to a vote at the regular general meeting to be held in March. The SFC’s administrative penalties are not compulsory by law but companies can hardly reject them considering the negative public opinion that would follow such a decision.
Kim has led Samsung BioLogics since its founding in 2011 and is recognized as the core of the company’s competitiveness. He has made Samsung BioLogics the world’s largest biopharmaceutical contract manufacturing organization (CMO) with an annual production capacity of 360,000 liters in seven years after the establishment.
Earlier, the SFC also recommended the company to designate external auditors for three years and rewrite the financial statements. With the court’s latest decision, however, these recommendations are also suspended. It is a favorable development for Samsung BioLogics as it supports Samsung BioLogics’ case that it has not committed any wrongdoing and that the change in accounting methods was in line with international accounting standards. It can also improve the firm’s international creditworthiness to its main clients – global pharmaceutical companies.
Now Samsung BioLogics is planning to focus on the upcoming administrative lawsuit. To this end, the company will check accounting documents and strengthen the counsel in order to prove the legitimacy of its accounting practice. Some market experts say that the court’s acceptance of the firm’s request for an injunction has boosted Samsung BioLogics’ chance to win the case as it suggests that the court believes that there is room for a battle of legal principles in the lawsuit.