[News Terms] The 'Seongnyeon Hukyeon System' Becomes a Hidden Obstacle in Management Rights Disputes

Recently, as the power struggle between siblings in the Korea & Company Group (formerly Korea Tire Group) has intensified, the issue of adult guardianship judgment concerning honorary chairman Cho Yang-rae has once again emerged as a variable.

The adult guardianship system is a system that appoints a guardian to assist adults who have difficulty making decisions due to old age, disability, or illness. It was introduced and implemented on July 1, 2013, by abolishing the existing interdiction and limited interdiction systems to protect the rights of individuals with intellectual and mental disabilities. The interdiction and limited interdiction systems were criticized for ignoring the human rights of disabled persons because they were designed more for the safety of social transactions as a whole rather than for protecting the disabled individuals themselves. In contrast, the adult guardianship system allows the family court to assess the degree of each individual's disability and provide protection accordingly.

When the person concerned, relatives, prosecutors, etc., apply for adult guardianship, the court confirms the mental state of the adult ward through a medical examination by a court-appointed doctor and conducts a procedure to receive statements from the person concerned before appointing a guardian. The appointed guardian manages the ward's property and exercises authority such as representation and consent in legal acts. Additionally, if the ward finds it difficult to make decisions independently, the guardian can make decisions related to personal matters such as medical care, rehabilitation, and education under the authority granted by the court.

On April 21, 2021, Cho Yang-rae, Chairman of Korea & Company, attended the adult guardianship hearing held at the Seoul Family Court in Seocho-gu, Seoul.

Earlier, in 2020, when honorary chairman Cho Yang-rae transferred all his shares of Korea & Company to his second son, Chairman Cho Hyun-beom, eldest daughter Cho Hee-kyung, director of the Korea Tire Nanum Foundation, filed for adult guardianship judgment, stating, "It must be determined whether this decision was made voluntarily and in a healthy mental state." At that time, the management dispute was temporarily resolved in favor of Chairman Cho, and the limited guardianship commencement judgment filed by Director Cho was dismissed. However, the situation reversed recently as Chairman Cho was arrested on charges of embezzling and breach of trust involving 20 billion won of company funds.

On the 17th, Director Cho declared, "To improve the governance structure of Korea & Company, I have come to support the positions of my younger brother Cho Hyun-sik (advisor of Korea & Company) and my younger sister Cho Hee-won." After the limited guardianship commencement judgment for honorary chairman Cho was dismissed in April last year, Director Cho appealed, stating, "A decision without a mental examination is not an objective judgment," and this trial is still ongoing. Honorary chairman Cho's mental examination was conducted at Seoul Boramae Hospital, and the hospital reportedly sent the results to the court on the 27th of last month. The hearing for the adult guardianship judgment concerning honorary chairman Cho is scheduled for the 11th of next month.

If the court concludes that honorary chairman Cho has impaired judgment and accepts Director Cho's adult guardianship petition, the shares transferred to Chairman Cho three years ago through a block deal could be invalidated. In this case, Chairman Cho's shareholding would significantly decrease to the 18% range, and if Advisor Cho, Director Cho, and the private equity fund MBK Partners, which launched a public tender offer, combine their shares, the winner of the battle could change.

On the other hand, honorary chairman Cho's side maintains that there is no problem according to the hospital's examination results. On the 20th, Korea & Company Group issued a statement criticizing Director Cho, saying she is "intimidating a healthy father by using the limited guardianship commencement petition as a weapon."