According to investment banking (IB) industry sources on the 8th, inheritance proceedings regarding the shares in Youngpoong and KZ Precision Corporation held by Professor Choi have recently begun in earnest. Specifically, the proceedings involve 25,945 shares (0.14%) of Youngpoong and 448,130 shares (2.85%) of KZ Precision Corporation held by the deceased. KZ Precision Corporation stated, “Regarding changes resulting from the death of Professor Emeritus Choi Jeong-woon, the inheritance process is currently underway, and we plan to issue an additional disclosure as soon as the relevant details are finalized.”
20 Days Until Inheritance Value Is Finalized: Market Watches Stock Price Closely
The key asset subject to inheritance is the 1.51% stake (314,468 shares) in KoreaZinc held by the deceased. Based on the closing price on the 7th (1,065,000 won), this stake is valued at 334.9 billion won, representing a significant portion of Chairman Choi Yoon-beom’s camp’s efforts to defend management control. Since the bereaved family typically negotiates the division of the entire estate following a death, market attention is focused not only on Youngpoong and KZ Precision Corporation but also on the fate of the KoreaZinc stake, which holds the highest asset value.
The inheritance value to be borne by the heirs is expected to be finalized on the 27th. Under the Inheritance and Gift Tax Act, the inheritance value of listed stocks is calculated by averaging the closing prices over a total of four months—two months before and two months after the date of death. The valuation period based on the deceased’s date of death (May 27) runs from March 27 to July 27. As KoreaZinc’s stock price has fallen from the 2.1 million won range last February to the 1 million won range recently, the final inheritance value could fluctuate by hundreds of billions of won depending on the stock’s performance over the remaining 20 days.
The investment banking industry anticipates that pressure on the bereaved family to sell their shares (via a block deal) will intensify as November—the deadline for filing the inheritance tax return—approaches. The deadline for filing the inheritance tax return is six months from the last day of the month in which the death occurred; the deadline for the bereaved family to file their return and make the initial payment is estimated to be November 30. Although whether and when a sale will take place remains uncertain, the situation could have a significant impact on the friendly shares held by Chairman Choi’s side.
Pressure to Sell Likely to Mount Ahead of November Payment Deadline
Even if the heirs attempt to utilize an installment payment plan to spread the tax payments over several years, they face significant obstacles. To apply for an installment plan, they must provide the National Tax Service with reliable tax collateral; however, most of the deceased’s shares are already pledged as security to a consortium of lenders, including Hana Bank, to defend the Choi family’s management rights and finance a counter-takeover bid.
Under tax law, shares already pledged as collateral for other debts fall under the “double collateral” regulation and are not recognized as tax collateral by the National Tax Service. This is because, in principle, the National Tax Service is prohibited from taking a subordinate lien on shares already encumbered by a first-priority pledge, or it cannot recognize the value of such collateral. Consequently, it has been pointed out that in order for the bereaved family to obtain an installment payment plan or secure funds for the inheritance tax, they have no choice but to remove the relevant shares from the existing joint loan agreement—intended to defend management control—and request the release of the collateral.
In fact, a similar pattern was observed during the inheritance process for the late Honorary Chairman Choi Chang-geol, who passed away last October. Honorary Chairman Choi had established a pledge in favor of Hana Securities for 69,850 shares (0.44%) of KZ Precision Corporation that he held as of September 2024; however, during the renewal of the collateral agreement following his death, the deceased’s shares were excluded from the list of collateral under the joint loan agreement. These shares were inherited by his son, Chairman Choi Yoon-beom, who finalized the inheritance procedures last month.
An investment banking industry source explained, “There is a precedent from the time of Honorary Chairman Choi Chang-geol’s passing, when the pledge was released during the contract renewal and inheritance tax settlement process,” adding, “It is possible that Professor Choi Jeong-woon’s family may also request the release of their shares in KoreaZinc or Youngpoong from the collateral list or consider selling them.”
