[Invest&Law] No Asset Division for Management Purposes: A New Twist in Owner Family Divorce Cases

Supreme Court Sets New Standard in Chey Tae-won and Roh So-young Divorce Case
Asset Division Now Depends on the 'Nature of Money'
Only Post-Breakdown, Non-Marital Expenses Are Subject to Division
Timing and Purpose of Spending to Be Closely

The legal community is abuzz following a Supreme Court statement that even if one spouse spends money after the breakdown of a marriage, such funds may be excluded from the division of assets if the purpose was related to company management. This legal principle was first established on October 16 in the divorce case between Chey Tae-won and Roh So-young. Experts say this marks the opening of a new battleground in high-net-worth divorce cases over the "nature of money."

According to the legal community on October 29, until now, in divorce settlements, even if one spouse spent money on a third party after the marital breakdown, that amount was considered part of the couple’s original joint assets (the denominator), and the division ratio (the numerator) was calculated accordingly. In other words, "current assets + money already spent by the couple = joint assets," and after calculating each party's contribution, the assets were divided.

However, the Supreme Court has now added two more conditions. The Court ruled for the first time that "even if one spouse disposes of assets, only if ① the disposal occurred after the breakdown of the marriage, and ② the expenditure was unrelated to the formation or maintenance of joint marital assets-such as money spent on an extramarital relationship-can it be included in the division of assets." This means that from now on, both the timing (whether before or after the breakdown) and the purpose (personal expenditure or related to joint marital assets) will be scrutinized in detail.

Drawing the Line Between Business Activities and Divorce Asset Division

This legal principle is interpreted as an attempt to reduce confusion in high-net-worth divorce cases where business activities and domestic life are intertwined. It may be unreasonable to treat actions such as selling shares or returning salaries to defend management rights as "expenditures related to the marital relationship" and include them in the division of assets during divorce proceedings. Yoon Jisang, a lawyer at Jonjae Law Firm and a former presiding judge at the Family Court, said, "Even in previous lower court rulings, there were cases where funds spent for joint purposes after the breakdown were not included in the division of assets. The Supreme Court has now clarified this point," adding, "From now on, the purpose of the expenditure will be at the center of disputes." Lee Kyungjin, a lawyer at Barun Law, commented, "In ordinary divorce cases, it is rare for asset disposals after filing to be related to the couple’s joint life," but "in divorce cases involving business owners or high-net-worth individuals, arguments based on the Supreme Court’s statement may be raised."

Chey Tae-won's Divided Assets Shrink... Attention on Kwon Hyukbin's Lawsuit

In fact, approximately 1 trillion won worth of assets-including shares donated by Chey Tae-won, Chairman of SK Group, from 2012 to 2018 to the Korea Foundation for Advanced Studies (91,895 shares), the Chey Jonghyun Academic Foundation (200,000 shares), and relatives (3.29 million shares), as well as salaries returned to the company-were excluded from the division of assets due to this Supreme Court statement. The reason was that these actions took place before the marital breakdown and were for "securing management rights and stabilizing company operations," so they were excluded from the division. This legal principle may also apply to the "divorce of the century, round two" involving Kwon Hyukbin, the founder and CVO of Smilegate, whose first hearing is scheduled for November 12. Although Kwon's spouse, Ms. Lee, obtained a court order in 2022 to prohibit the sale of shares, if the breakdown occurred before that, any share transfers in the interim would be considered "disposals after the breakdown." In this case as well, whether the expenditures were for business purposes or for other reasons will be the key issue.

A Shield for Owners? A Disadvantage for the Other Party?

The legal community believes this precedent is likely to work in favor of asset holders. One divorce litigation specialist said, "There could be litigation strategies where an asset holder preemptively transfers affiliate shares or gifts assets to a third party and later claims it was for 'business purposes' to avoid asset division in a divorce," adding, "This will lead to more complex battles over proof and evidence." Kwak Yunseo, a lawyer at YK Law Firm, noted, "There will be intense disputes over whether the disposal of assets was an act of concealment to avoid division or the result of a business decision."

Meanwhile, some point out that although Chairman Chey was the at-fault party, he effectively obtained a favorable outcome, raising concerns about a weakening of the fault principle (the rule that a spouse responsible for the breakdown of a marriage generally cannot file for divorce) and a strengthening of the breakdown principle. However, the majority opinion remains cautious. In fact, since the damages awarded reached a record 2 billion won, some believe the cap on damages for at-fault spouses has been raised. Lee Kyungjin, a lawyer at Barun Law, explained, "This case should be understood as a divorce established through Ms. Roh’s counterclaim," adding, "Although the Supreme Court has detailed the exceptional cases where divorce claims by at-fault spouses have been accepted since 2016, the Court’s intent is not to show a trend toward the breakdown principle."