Dividing Private Company Shares in a Divorce in South Korea

One spouse pours everything into building a company; the other runs the household and raises the children. When that company’s private shares are worth tens of billions of won, how should a court in South Korea divide them on divorce? The shares cannot be sold on an open market, and splitting them in kind can destabilize control of the business.

In May 2026, the Supreme Court of Korea gave important guidance on this question (2024Meu16033). Previously, courts applied in-kind and buyout divisions inconsistently because no clear standard governed the choice of method. The Court now treats a buyout as the preferred default for private company shares, while drawing a firm limit: where a buyout-only order would seriously harm fairness between the spouses, the court must consider mixing in an in-kind split. For anyone divorcing a spouse who holds unlisted shares in South Korea, this decision sets the starting point.

What is the default method for dividing private company shares?

The Supreme Court of Korea held that, absent special circumstances, courts should favor a buyout when dividing unlisted company shares (Supreme Court of Korea, 2024Meu16033). The Court reasoned that the closed nature of private shares can leave a spouse who receives a minority stake in kind worse off than one who receives cash.

Korean courts have several tools for property division. A court may order an in-kind split, a sale by auction, or an assumption of debt, but it may also assign a specific asset to one spouse and require that spouse to pay the other a sum of money, a method known as compensatory division (daesang-bunhal), or any combination of these (Supreme Court of Korea, 97Meu1486 of February 13, 1998, and the en banc decision 2012Meu2888 of July 16, 2014).

So why is a buyout preferred for unlisted shares? The Court pointed out that private shares are typically traded only among insiders, with no free price formed through open-market competition. As a result, a spouse who is not involved in running the company and receives a minority block of unlisted shares in kind faces three problems: first, the company’s closed character makes it hard to convert those shares to cash at a fair price; second, the stake is too small to participate in management; and third, the value of the shares is relatively exposed to acts that impair the company’s value, or to management decisions, by the other spouse who holds the majority. For these reasons, the Court held that, absent special circumstances such as an agreement between the spouses on the method of division or difficulty in determining objective value, courts should as a rule give priority to a buyout.

When must a court use an in-kind split instead?

The buyout-first rule has a clear limit. Where ordering a buyout only would seriously harm fairness between the spouses, the court must not insist on a buyout alone; instead it must actively consider mixing in an in-kind split and other methods (Supreme Court of Korea, 2024Meu16033).

The facts of the case illustrate that limit. One spouse largely handled the household and child-rearing, while the other established and ran an insurance agency company and a travel business. The combined net assets subject to division came to about 89.1 billion won: roughly 3.5 billion won for the homemaker spouse and about 85.6 billion won for the business-owner spouse, of which the 2,000 unlisted shares of the company at issue were valued at about 75.3 billion won.

The lower court set the division ratio at 20% for the homemaker spouse and 80% for the business-owner spouse. It then ordered an in-kind split of 432 of the 2,160 travel-company shares (the 20% share), honoring the parties’ agreement, but ordered a buyout for all remaining assets, including the company shares at issue, requiring the business-owner spouse to pay 14.3 billion won.

The problem was that this structure was almost impossible to perform. Setting aside the roughly 75.3 billion won in shares, the business-owner spouse’s net assets were only about 10.3 billion won, far short of the 14.3 billion won settlement. Much of that 10.3 billion won was real estate, and much of it was co-owned with the other spouse, so it could not easily be sold without cooperation; even liquidating everything except the shares left a shortfall of about 4 billion won. In the end, the owner could not pay the full settlement without selling the shares or pledging them to a third party for a loan, and selling them would bring loss of corporate control and the shifting of various taxes and costs onto the owner.

On these facts, the Supreme Court of Korea held that ordering a buyout only was impermissible because it seriously harmed fairness between the spouses, and it reversed the property division portion of the lower court’s judgment and remanded the case (Seoul High Court, 2024Reu21037 and 2024Reu21044, decided September 6, 2024). In short, where the value of unlisted shares far exceeds the obligor spouse’s other net assets so that a cash settlement is practically impossible, the court must actively consider mixing in an in-kind split.

Are unlisted shares subject to property division in South Korea?

Yes. If unlisted company shares were acquired or maintained through the spouses’ joint effort during the marriage, they are subject to property division even when registered in one spouse’s name. Registration in one name alone does not make the shares non-divisible separate property.

Under South Korean law, a spouse may claim property division on divorce (Korean Civil Act Article 839-2(1)), and the rule also applies to judicial divorce (Article 843). If the spouses cannot agree, the family court fixes the amount and method of division, taking into account the assets built through both spouses’ cooperation and other circumstances (Article 839-2(2)). The system presupposes a separate-property regime between spouses (Article 830) but works to liquidate the joint property formed through their cooperation during the marriage.

As a practical note on tax: transferring unlisted shares to a spouse as part of property division on divorce is generally understood not to be a sale, so that transfer itself does not trigger capital gains tax in South Korea. That point concerns the transfer between spouses; as seen above, selling the shares to a third party to raise the settlement money is a separate matter that can carry its own tax consequences.

How do Korean courts value unlisted shares?

Korean courts value unlisted shares in stages. First, if there is a normal arm’s-length transaction that properly reflects objective exchange value, that transaction price is treated as the market value (Supreme Court of Korea, 2000Du1287 of July 28, 2000). Where a market value exists, the court should not fall back on a supplementary valuation method.

If there is no normal transaction, the court draws on generally accepted methods such as the market-value method, the net-asset-value method, and the earnings-value method, but no single method must always apply; the court considers the company’s situation and the characteristics of its industry to arrive at a fair value (Supreme Court of Korea, 2004Ma1022 of November 24, 2006, and 2016Ma272 of December 17, 2018).

One point deserves particular attention: net asset value alone is not enough. Valuing unlisted shares using only net asset value, which is total assets minus total liabilities, fails to reflect earnings value and tends to overstate the value above the true market price; a valuation that considers both net asset value and net profit value is more reliable (Supreme Court of Korea, 2006Meu2757 of July 26, 2007, and its lower-court judgment, Seoul High Court 2004Reu1714 of October 24, 2006). In that case, the trial court had adopted a valuation based on net asset value alone, but the appellate court and the Supreme Court rejected it and adopted a valuation that considered both net asset value and net profit value.

A supplementary method often used in practice is set out in Article 54 of the Enforcement Decree of the Inheritance and Gift Tax Act. Under it, unlisted shares are valued at the weighted average of net profit value and net asset value per share in a ratio of 3 to 2 (for a real-estate-heavy company, the ratio becomes 2 to 3); if that weighted average is lower than 80% of the net asset value per share, the value is set at 80% of the net asset value per share. This supplementary method does not, however, have to apply to every case. For example, when determining the share-purchase price for a shareholder who dissents from a merger, the formula in that Decree need not be applied as is (Supreme Court of Korea, 2016Ma272 of December 17, 2018).

The value of unlisted shares is generally assessed as of the valuation date for property division, which is ordinarily the close of argument at the fact-finding stage.

How is the overall division ratio determined?

The division ratio reflects each spouse’s contribution to the entire body of assets, considered as a whole, rather than a contribution to any single asset. So even where unlisted shares are involved, a court should not carve out the shares and apply a different ratio to them alone.

The Supreme Court of Korea held that a court may not, without a reasonable basis, set different sharing ratios for positive and negative assets, or set different division ratios for individual assets so as to arbitrarily adjust the value of the divisible positive assets (Supreme Court of Korea, 2005Da74900 of September 14, 2006). Applying a separate, lower ratio to unlisted shares merely because their appraised value is large, thereby distorting the real outcome of the division, can run afoul of this principle.

What happens to shares in an insolvent company?

Unlisted shares that have no real asset value may be excluded from the divisible positive assets. The principle that supports this conclusion, however, was developed directly in the context of setting aside a fraudulent transfer, so applying it to property division requires a case-by-case review.

In an action to set aside a fraudulent transfer, when calculating the debtor’s positive assets, courts exclude, absent special circumstances, any asset that has no real value and so cannot serve as common security for creditors (Supreme Court of Korea, 2001Da32533 and 2004Da58963). Applying this principle, a recent appellate court excluded from the debtor’s positive assets the unlisted shares of a company whose shares were not readily tradable, for which there was no evidence of over-the-counter price formation, and which, after deducting goodwill and similar items, could be seen as nearly insolvent and ultimately went bankrupt (Seoul High Court, 2024Na2002874 of January 22, 2025).

To stress the point again, that judgment concerns the calculation of a debtor’s positive assets in setting aside a fraudulent transfer; it is not a direct ruling on calculating positive assets for divorce property division. The conclusion that worthless shares can be excluded may well be persuasive in the property-division context, but a court there must assess the company’s situation and the real value of the shares on the specific facts.

What should foreign investors and IFEZ companies know?

Atlas Legal is based in the Songdo International Business District within the Incheon Free Economic Zone (IFEZ) in South Korea, which together with Cheongna International City and Yeongjong International City forms the three districts of the IFEZ. Many foreign investors and executives who live or hold company shares in these districts ask how a Korean divorce would affect their stake.

Where Korean law governs the divorce, property division applies regardless of nationality, and unlisted shares in a Korean company can be drawn into the division. The buyout-first rule means that, in practice, a non-owner spouse will more often receive cash than an illiquid minority stake in a Korean private company; conversely, an owner-spouse must be ready to fund a cash settlement and should consider, in advance, how the shares would be valued and whether an in-kind split might be mixed in.

Three practical points deserve attention. First, the right to claim property division lapses two years after the divorce, an exclusion period that must be watched carefully (Korean Civil Act Article 839-2(3)). Second, a waiver of property division rights made before the marriage is dissolved is not enforceable, so a waiver document signed during divorce proceedings may be denied effect, although a genuine property division agreement made on the premise of an agreed divorce is treated differently (Supreme Court of Korea, 2002Meu1787 of March 25, 2003). Third, because unlisted shares are generally valued as of the close of argument at the fact-finding stage, parties should plan early for how changes in the company’s value after separation will be reflected, and, where possible, agree on the method of division and the amount and manner of any cash settlement to prevent disputes.

Frequently asked questions

Dividing unlisted company shares on divorce in South Korea turns heavily on the method of division and on how the shares are valued. For a review of a specific situation, you are welcome to contact Atlas Legal at +82-32-864-8300.

About the Author

Soyoung Park | Representative Attorney

Family Law, Inheritance, Construction & Real Estate Disputes

Judicial Research and Training Institute, 33rd Class

Korea University, Department of Law

Atlas Legal | Incheon Songdo, South Korea

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