The first-instance ruling in the divorce and property division suit between Kwon Hyuk-bin, founder and chief vision offering officer (CVO) of domestic game company Smilegate, and spouse Ms. Lee will come on the 9th. It has been about four years since Lee filed suit in Nov. 2022.
The biggest issue in this trial is the equity of unlisted Smilegate, 100% owned by founder Kwon. As the company's value was appraised at up to the 8 trillion won range during the court appraisal, depending on how far the court recognizes this equity as property jointly formed by the couple, the property division amount could reach the trillion-won level.
The Seoul Family Court Family Division 3 (Presiding Judge Jeong Dong-hyeok, Director General) will deliver a verdict at 2 p.m. on the 9th on the divorce and property division claims between founder Kwon and Lee. The first hearing was held in Nov. last year, and the court closed arguments on July 8. Founder Kwon's side has said there is no intention to divorce and has asked the court to dismiss Lee's claim.
◇The key is whether to view the spouse as a "co-founder"
Before the property division, the court must first decide whether to accept the divorce claim itself. If the divorce is recognized, the core issue becomes how far to view, among the Smilegate equity held by founder Kwon, as marital property.
Lee's side argues that Lee made a significant contribution to the company's founding and growth, noting that Lee held 30% equity in the early days of Smilegate's establishment and served as CEO and registered director.
By contrast, founder Kwon's side maintains that Lee did not actually contribute capital at the time of the company's establishment and did not substantially participate in management, so Lee cannot be viewed as a co-founder.
Ultimately, the question is whether the court will recognize Lee's early equity holding and experience as CEO and director as a substantive contribution to the company's growth. Depending on whether it was merely nominal equity or a title, the extent of actual capital contribution and management participation, and how the court evaluates the direct and indirect contributions—such as household work and childrearing—during the long marriage to the formation, maintenance, and increase of assets, the decision and ratio of partitioning could vary widely.
◇Corporate value in the high-6 trillion won range to 8.016 trillion won… valuation method is a variable
Another variable that will determine the scale of property division is how to assess the corporate value of unlisted Smilegate.
In the court appraisal, if the discounted cash flow (DCF) method, which converts future cash flows into present value, is applied, the company's value was evaluated at about 8.016 trillion won. It is known that under the valuation method in the Inheritance Tax and Gift Tax Act, it was assessed at around 4.9 trillion won.
If the half (50%) equity that Lee requested is simply applied to the highest appraised value, it exceeds 4 trillion won. However, 8.016 trillion won is merely the appraised value of the company and does not mean the actual property division amount Lee would receive.
Depending on which corporate value assessment method the court adopts, how far it recognizes founder Kwon's equity as marital property, and how much it recognizes Lee's contribution to asset formation, the actual partitioning amount could vary greatly.
◇If it exceeds 944 billion won, it becomes the largest ever… interest also in how to partition unlisted shares
The method of property division is also of interest. Since founder Kwon holds 100% equity in Smilegate, depending on whether the court splits the equity itself or leaves the equity with founder Kwon and orders payment to Lee, it could also affect the company's governance structure.
In May, in a property division case involving unlisted shares, the Supreme Court determined that, absent special circumstances, it is desirable to give priority, where possible, to "target partitioning," which attributes the shares to the existing titleholder and orders payment of money equivalent to the other spouse's share of the property division. However, it said that if target partitioning alone would significantly undermine fairness between the parties, courts should actively consider mixing various methods, such as in-kind partitioning.
If Smilegate equity is included in the property division and the partitioning amount is set in the trillions of won, the ability to pay cash and the issue of maintaining the equity are also expected to come to the fore.
So far, the largest property division amount awarded by a court in a domestic divorce case is 944 billion won in the remand trial involving Chey Tae-won, chair of the SK(034730) Group, and Roh Soh-yeong, director of Art Center Nabi. However, Chey has appealed again, so the ruling is not yet final. If the first-instance property division amount in founder Kwon's case exceeds that, it would be the largest ever by judgment amount.