Succession picks up pace on Kospi as ownership reshuffles multiply

Ownership changes tied to founding-family succession are accelerating on the Kospi. This month, LX and Korea United Pharm both transferred their largest-shareholder status to second-generation heirs, while Hanwha Group used a spin-off to carve out distinct business domains for the third generation, marking the formal start of independent management by Chairman Kim Seung-youn's three sons.

Inheritance and gift tax burdens, alongside the need to preserve control, are widely cited as the key variables in succession planning — and with the government now moving to overhaul business-succession tax rules, attention is turning to how ownership structures at listed companies may shift.

According to Korea Exchange, seven Kospi-listed companies changed their largest shareholder between the start of this month and Wednesday. Eight Kosdaq-listed companies did the same over the same period. From January through July this year, 39 Kospi companies and 83 Kosdaq companies recorded such changes — with Kosdaq running at more than double the Kospi pace.

This month's Kospi changes have been notable for their succession dimension. LX and Korea United Pharm both completed stake transfers to second-generation heirs, while Hanwha Group used a spin-off to divide business responsibilities among Chairman Kim's three sons, formally launching a third-generation management structure.

In succession processes involving founding families, inheritance and gift tax burdens and the need to maintain control are the primary forces driving stake movements. "Controlling shareholders are using a combination of tools — block deals, treasury shares, spin-offs, holding company conversions and realignment of friendly stakes — to manage inheritance tax exposure and preserve control at the same time," said Park Se-yeon, a researcher at Hanwha Investment Securities. "As long as the current estate-tax system remains in place, there will be recurring pressure to restructure ownership ahead of each succession."

At LX, the handover to the second generation is well under way. LX Group Chairman Koo Bon-joon gifted 6.1 million LX Holdings shares to his eldest son, Koo Hyung-mo, president of LX MDI, causing the largest shareholder to change Monday from Koo Bon-joon and 15 others to Koo Hyung-mo and 14 others. The chairman is scheduled to transfer an additional 3.815 million shares on Sept. 11.

Once the transfers are complete, Koo Hyung-mo's stake will rise to 24.68 percent while the chairman's will fall to 7.24 percent. Because Koo Bon-joon remains active in management, the succession of operational control is not yet finished, but the transfer of the holding company stake is clearly gathering momentum.

LX Group was spun off from LG Group in 2021 and has since expanded through acquisitions and investment. Its total assets grew 85.9 percent — from 7.18 trillion won ($5.12 billion) at end-2020, before the separation, to 13.35 trillion won at end of last year.

At Korea United Pharm, founder and chief executive Kang Deok-young gifted 800,000 shares to his eldest son, Kang Won-ho, also a chief executive at the company, triggering a change in the largest shareholder. Kang Won-ho's stake rose from 13.09 percent (2,083,400 shares) to 18.12 percent (2,883,400 shares). Including transfers made since last year, the total shares gifted to the son stand at 2 million.

At Hanwha Group, the third-generation management structure came into sharper focus alongside a spin-off. Hanwha Corp. split into a surviving entity and a newly established holding company, Hanwha Machinery & Services Holdings (Hanwha M&S), causing the largest shareholder of Hanwha Vision and Hanwha Galleria to shift from the original Hanwha Corp. to the new holding company.

The surviving Hanwha Corp. retains defense, shipbuilding, energy and financial affiliates — including Hanwha Aerospace, Hanwha Solutions and Hanwha Life Insurance — while the new holding company takes in machinery, semiconductor equipment, robotics and retail and service units, including Hanwha Vision, Hanwha Semitech, Hanwha Robotics, Hanwha Galleria and Hanwha Hotel.

The spin-off coincided with a clearer division of business domains among Chairman Kim's three sons. Senior Executive Vice Chairman Kim Dong-kwan oversees defense, shipbuilding and energy; Vice Chairman Kim Dong-won handles the financial arm; and President Kim Dong-sun leads retail, leisure and robotics. The absorption of the tech and lifestyle businesses — led by Kim Dong-sun — into the newly created Hanwha M&S is seen as cementing the three brothers' independent management spheres.

As family succession continues, the government has also moved to revise related tax rules. This month it unveiled a tax reform package that raises the ceiling on the family business inheritance deduction from 60 billion won to 100 billion won. In exchange, the required management tenure to qualify for the deduction will be extended from 10 years to 30 years, and the post-inheritance compliance period will be tightened from five years to 10. The special gift-tax regime for business succession will also require a 20-year management tenure. The package additionally introduces tax support for transfers of a business to a third party, not just to family members.

Attention is now turning to how these regulatory changes will affect future stake movements and ownership restructuring among founding families. "Smooth business succession can stabilize governance structures and enable more aggressive investment in new businesses and differentiated research and development strategies," said Baek Young-chan, a researcher at Sangsangin Securities. "Corporate value will naturally increase as a result."