Korean Supreme Court Clarifies Property Division Method for Unlisted Shares in Korean Divorce Cases

On May 29, 2026, the Supreme Court of Korea issued a landmark decision regarding the division of unlisted shares in a divorce property-division case. The ruling is significant because the Court expressly addressed how courts should approach cases where a large portion of the marital estate consists of founder-held shares in a privately held company.

The Court recognized that a cash settlement, commonly referred to in Korean practice as daesang-bunhal or compensatory division, is often the most practical method for dividing unlisted shares. However, the Court made clear that this approach should not be applied mechanically. Where a cash-only division would materially undermine fairness between the parties, courts must consider other methods, including a combination of cash payment and in-kind division of the shares.

Facts

1. The husband was the founder and operator of several unlisted companies. The parties’ divisible net assets were valued at approximately KRW 89.1 billion. Of that amount, approximately KRW 75.3 billion consisted of unlisted shares held by the husband in one company.
2. The wife had primarily handled household and child-rearing responsibilities, while the husband had built and operated the businesses.
3. The appellate court set the property-division ratio at 20% for the wife and 80% for the husband. It allowed the husband to retain the unlisted shares, but ordered him to pay the wife approximately KRW 14.3 billion in cash.
4. That result created a serious liquidity issue. Apart from the unlisted shares, the husband’s net assets were only about KRW 10 billion. In practical terms, he could not satisfy the cash award without selling shares, pledging shares as collateral, or otherwise placing his control of the company at risk.

Issue

The issue before the Korean Supreme Court was whether it was equitable to order a purely cash-based division where the overwhelming majority of the divisible estate consisted of unlisted shares that were difficult to value, difficult to liquidate, and closely connected to the founder-spouse’s management control.

Holding and Reasoning

The Supreme Court held that the appellate court erred by relying solely on a compensatory cash division. The Court reasoned that where a cash award would force the founder-spouse to sell or encumber a controlling stake, bear the related tax and transaction costs, and risk losing management control, courts must consider alternative or mixed methods of division.

The Court’s reasoning reflects the particular nature of unlisted shares. Unlike listed shares, unlisted shares do not have a readily ascertainable public market price. They are often difficult to sell, and minority interests may have limited practical value. For this reason, a cash settlement may often be appropriate, particularly where the non-operating spouse would otherwise receive illiquid minority shares with little control or marketability.

However, the Supreme Court emphasized that this preference is not absolute. If the founder-spouse must sell a substantial block of shares or borrow against the shares to fund the property-division award, the burden may become one-sided. The founder may bear the tax burden, transaction costs, financing risk, liquidity risk, and the risk of losing control, while the other spouse receives cash and avoids the economic uncertainty attached to the shares.

The Court also recognized that forced loss of management control may affect more than the founder’s personal financial position. In a founder-led company, management control may be closely tied to the company’s going-concern value. A forced transfer or monetization of shares may therefore affect the value of the company itself.

Significance

This decision gives Korean courts a more flexible framework for high-value divorce cases involving startups, founder-owned businesses, and closely held companies. It does not establish a rule that unlisted shares must be divided in kind. Rather, it requires courts to examine the commercial reality of the asset being divided.

In future cases, courts are likely to place greater emphasis on liquidity, valuation uncertainty, tax consequences, shareholder-control issues, transfer restrictions, and the potential effect of a forced sale or transfer on the company’s continuing enterprise value.

The ruling is also likely to influence pending and future high-value divorce disputes involving founder-held unlisted shares, including matters currently being handled by IPG Legal.

IPG Legal

At IPG Legal, we advise clients on complex divorce, pension, and cross-border property division, inheritance, custody, and family law cases.

by Sean Hayes
Sean Hayes is a senior foreign attorney at IPG Legal, one of Korea’s leading international law firms. With over two decades of experience in Korea, he is recognized as the first non-Korean attorney to work for the Korean court system and one of the first to be appointed a regular member of a Korean law faculty. He is known for his aggressive advocacy and proactive street-smart advice. Sean is recognized as a top attorney for his work in Asia, and his firm is ranked among the top dispute resolution law firms, with a tier ranking in leading legal rating services.

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