Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Dispute over stock inheritance erupts at LG
LG Group's headquarters in Yeouido, Seoul / Yonhap
By Baek Byung-yeul
By Baek Byung-yeul
Koo Kwang-mo, chairman of LG Group, Korea's fourth-largest conglomerate, has been embroiled in an inheritance dispute over the ownership of late Chairman Koo Bon-moo's shares.
Industry experts said Monday that the dispute erupted even though LG has traditionally handed over power to the chairman's eldest son.
“According to the law here, the deceased's estate shall be divided equally among the heirs while the surviving spouse inherits an additional 50 percent share, which means the spouse receives 1.5 shares and each child inherits 1 share. The spouse and the two daughters are raising the issue that LG Corp.'s stake held by the late chairman was not evenly distributed,” Kim Dae-jong, a professor of business administration at Sejong University, said.
In February, the chairman's mother, Kim Young-sik, and his two sisters, Koo Yeon-kyung, the chief of LG Welfare Foundation, and Koo Yeon-soo, filed a lawsuit with the Seoul Western District Court requesting the estate of the late chairman to be redistributed equally according to the law.
After the late chairman passed away in May 2018, his 11.28 percent share in LG Corp., a holding company of LG Group, was inherited by his son, the younger Chairman Koo, with 8.76 percent and his two daughters, Yeon-kyung and Yeon-soo, with 2.01 percent and 0.51 percent of the shares respectively. The current chairman, who is the nephew of the deceased chairman, was adopted in 2004 following the death of his only son in 1994.
The inheritance dispute comes unexpectedly as the group has been known for retaining its family tradition of handing the group's management power over to the eldest son of the chairman since the conglomerate was founded in 1947.
While many Korean conglomerates, such as Samsung and Hyundai, have been embroiled in family disputes over their respective estates, LG has been regarded as a family that has successfully maintained harmony within the family without causing any public scandals.
LG Group said that the inheritance was legally carried out through a family agreement.
“Any actions that shake the family tradition and management rights of the group cannot be tolerated,” a group spokesman said.
LG said the inheritance left by the late chairman includes 11.28 percent of the shares in LG Corp., totaling 2 trillion won ($1.53 billion). The surviving spouse and her two daughters agreed to inherit a portion of LG Corp., as well as the late chairman's personal assets, such as financial investment products, real estate and artwork, amounting to a total of 500 billion won. The inheritance was legally completed in November 2018, and the relevant information was reported to the tax authorities.
Although all shares in LG Corp. should have been inherited by the late chairman's son according to the group's principles and traditions, Koo accepted the request of the other three heirs and agreed to distribute the 2.01 percent and 0.51 percent stakes to his sisters, LG added.
If the inheritance is divided by law, Chairman Koo's share, the largest at 15.95 percent in LG Corp., will be reduced to 9.7 percent. The deceased's wife's share, who did not inherit any shares at the time of the late chairman's death in 2018, would increase from 4.2 percent to 7.95 percent, while the share held by his sisters would increase from 2.92 percent to 3.42 percent and 2.72 percent from 0.72 percent respectively.
In particular, the combined shares of the deceased's wife and two daughters would amount to 14.09 percent, which could exceed the younger Koo's shares, potentially shaking his management rights over the group.
The key to this inheritance dispute is whether the court will accept the lawsuit filed at a point in time when the three-year statute of limitations of the inheritance claim has already passed.
Also, Chairman Koo agreed to pay an inheritance tax of about 720 billion won in six installments over five years in 2018 and has already made five payments with the final one scheduled to be made at the end of this year.
An accountant working in Seoul, who declined to be named, said, “It seems to be difficult for the three to win the lawsuit to receive inheritance rights since the three-year statute of limitation has already passed.”