Police are investigating whether Hanjin Group’s holding company, Hanjin KAL, transferred treasury shares worth approximately KRW 66.3 billion to an employee welfare fund to protect Chairman Cho Won-tae’s control of the company rather than primarily to benefit employees.
The investigation centers on the transfer of treasury shares to an in-house employee welfare fund, which enabled the shares to carry voting rights. Investigators are examining whether the decision was a legitimate employee welfare measure or an attempt to strengthen the controlling shareholder’s position.
According to reports, the Financial Crime Investigation Unit of the Seoul Metropolitan Police Agency’s Metropolitan Investigation Division recently conducted a search and seizure at Hanjin KAL. Cho and Hanjin KAL CEO Ryu Kyung-pyo were reportedly identified as suspects in connection with alleged breaches of fiduciary duty under South Korea’s Act on the Aggravated Punishment of Specific Economic Crimes. The allegations remain under investigation, and no finding of guilt has been established.
Police are reportedly examining a 1999 Supreme Court ruling involving former Kia Group Chairman Kim Sun-hong as a potential precedent. In that case, Kia Group executives provided approximately KRW 32.2 billion in company funds to an employee organization known as the Management Development Committee, which used the money to purchase company shares amid a threat to the group’s management control.
Prosecutors argued that the funding was intended primarily to defend management control rather than to promote employee welfare. The courts found the executives criminally liable for breach of fiduciary duty, and Kim received a four-year prison sentence that was upheld by the Supreme Court.
Investigators are examining whether the Kia case shares key legal and factual similarities with Hanjin KAL’s transaction. Both cases involved company assets being used in connection with employee organizations and the acquisition or activation of voting rights. However, there is an important distinction: Kia provided cash for share purchases, while Hanjin KAL transferred shares it already held.
On May 15, 2025, Hanjin KAL transferred 440,044 treasury shares to its employee welfare fund. Based on the share price at the time of the board decision, the shares were valued at approximately KRW 66.3 billion, representing around 0.66% of the company’s total outstanding shares.
Treasury shares generally do not carry voting rights while held by the issuing company. When transferred to an employee welfare fund, however, those shares may acquire voting rights, potentially affecting shareholder decisions and the balance of power in corporate governance.
The size of the contribution has also attracted scrutiny. According to reports, Hanjin KAL had 25 full-time employees. Dividing the estimated value of the transferred shares by that headcount would amount to more than KRW 2.6 billion per employee. This is a simple comparison rather than an estimate of individual benefits, since welfare fund assets are not necessarily distributed equally among employees. Nevertheless, investigators are expected to examine whether the contribution was proportionate to the company’s employee welfare needs.
Another central question is why the company chose to contribute treasury shares rather than cash or other assets. Police are examining whether executives understood that the transfer could activate voting rights, whether management control was discussed during the decision-making process, and whether the transaction had a reasonable business and employee welfare rationale.
The investigation is expected to focus on the purpose of the transfer, the potential impact on the company and the involvement of senior executives. Police are reviewing board meeting minutes, internal reports and other materials obtained during the search to establish who proposed the transaction, when Cho was informed and how the decision was approved.
Investigators are also expected to examine how the welfare fund exercised the voting rights attached to the shares and who influenced those decisions. Interviews with Hanjin KAL employees and key board participants may follow as the review of seized materials progresses.
The central legal issue is whether the transfer represented a legitimate corporate decision or an improper use of company assets that benefited a particular individual’s management control. Establishing a breach of fiduciary duty would require evidence supporting the relevant legal elements, including the executives’ conduct, intent and any resulting harm to the company.
The case could become a significant test of how South Korean authorities assess the use of treasury shares and employee welfare funds in disputes involving corporate control. Whether the Kia Group precedent can be applied to Hanjin KAL will depend on the specific circumstances of the transaction and the evidence gathered regarding the executives’ intentions and decision-making.
Police are continuing to analyze the materials to determine whether the transfer was intended to serve employee welfare or to influence the company’s governance structure. The extent of Cho’s involvement and the circumstances surrounding the board’s decision are likely to be central to the next stage of the investigation.
