[Invest&Law] The Legacy of the Late Jo Seok-rae Shrouded in Mystery... Legal Circles Focus on Jo Hyun-moon's Reserved Portion Lawsuit

After the "Brotherly Strife," Jo Hyun-moon Cut Ties
Unable to Even Be Listed Among Survivors
Legal Circles Expect "No Inheritance Share"
If Winning the Inheritance Portion Lawsuit, Receives 2.5% Stake

With the funeral procedures for the late Jo Seok-rae, Honorary Chairman of the Hyosung Group, completed on the 2nd, attention is turning to whether the second son, former Hyosung Group Vice Chairman Jo Hyun-moon, will take legal action regarding inheritance issues.

The second son of the late Cho Seok-rae, Honorary Chairman of the Hyosung Group, former Hyosung Vice Chairman Cho Hyun-moon, is leaving the funeral hall after paying respects at his father's funeral altar set up at Yonsei University Severance Hospital in Sinchon, Seodaemun-gu, Seoul, on the afternoon of the 30th of last month.
The name of former Vice Chairman Cho, who triggered the "Hyosung Brothers' War," was not listed on the family member list displayed on the electronic board at the funeral altar. [Image source=Yonhap News]

According to the business community on the 3rd, the Hyosung Group has not disclosed whether Honorary Chairman Jo left a will regarding the handling of company shares and assets. The focus of interest is the inheritance shares. The key issue is whether the second son, former Vice Chairman Jo, who triggered the ‘brothers’ conflict’ in 2013-2014 and severed ties with the family, was allocated any inheritance shares. If former Vice Chairman Jo files a lawsuit, there are two possibilities. If he was allocated inheritance shares but disputes the amount, he can file a ‘lawsuit for redistribution of inherited property.’ If he was not allocated any inheritance shares at all, he can file a compulsory portion lawsuit to claim his rightful share.

The legal community expects that, circumstantially, former Vice Chairman Jo was not allocated any inheritance shares. He was unable to be by his father’s side at the time of death on the 29th of last month, and from the 30th of last month to the 2nd, at the funeral hall set up at Severance Hospital in Seoul, his name was not listed among the bereaved family. Given that former Vice Chairman Jo had left the group, it is highly likely that Honorary Chairman Jo judged there was no practical benefit in giving him company shares. The criminal trial related to the ‘brothers’ conflict’ also supports the possibility that there is no inheritance share. The trial for former Vice Chairman Jo’s charge of ‘attempted coercion’ remains unchanged, with no withdrawal of the complaint or other developments.

Former Vice Chairman Jo is accused of threatening Chairman Jo Hyun-joon to distribute a press release claiming he was the main contributor to the company’s growth after leaving the company in 2013, and of coercing him by threatening to expose corruption unless he apologized for defaming his spouse.

If he wins the compulsory portion lawsuit, former Vice Chairman Jo is expected to receive 2.5% of the company shares. It is reported that Honorary Chairman Jo held 10.14% of the company shares during his lifetime. Dividing the deceased’s shares according to the statutory inheritance ratio (1:1:1:1.5), the three brothers would each receive 2.5%, and the wife, Song Gwang-ja, would receive 3.38%.

The business community largely expects that any dispute will be limited to inheritance issues. There is no room for former Vice Chairman Jo to interfere in management rights. After Honorary Chairman Jo stepped back due to health issues in 2017, the Hyosung Group’s management system stabilized under brothers Jo Hyun-joon and Jo Hyun-sang. In February, Hyosung’s board resolved a plan to spin off the investment division of six companies, including Hyosung Advanced Materials, Hyosung Information Systems (HIS), and Hyosung Toyota, to establish a new holding company tentatively named ‘Hyosung New Holding Co., Ltd.’ If the company split is approved at the extraordinary shareholders’ meeting in June, from July 1, the Hyosung Group will have a two-holding-company system consisting of the existing company Hyosung and the newly established Hyosung New Holding.

The inheritance tax burden on the Hyosung family is estimated to be about 420 billion KRW, considering the value of the company shares. The bereaved family is likely to use the installment payment system to pay in installments over five years. The business community also speculates that the Hyosung family may resort to stock-backed loans or selling some affiliate shares.