The founder of Ceragem, a healthcare equipment maker, is moving to hand over both ownership and management of the company to a professional manager rather than to a child. It is rare for a mid-sized Korean company with annual revenue of more than 500 billion won ($350 million) to name a professional manager as its successor. Yuhan, often cited as a model of corporate succession in Korea, transferred management control to professional managers but left its shares in the hands of the Yuhan Foundation. If Ceragem completes the handover, it will mark a succession model distinct from both family inheritance and a sale to a third party.
The aging of small business owners is already a reality. As of 2024, 33.3% of owners of small and medium-sized enterprises were 60 or older, and 28.6% of them had not chosen a successor. The Korea Capital Market Institute estimates that succession difficulties will put 310,000 companies up for sale by 2034. In some cases children want the proceeds of a sale rather than the business itself, but high regulatory barriers also block family succession. One example is the government's plan to tighten the requirements for the family business inheritance deduction, presented as a way to stop owners from setting up token "bread factories" — small side businesses nominally continued as the family trade — to qualify for the deduction and avoid inheritance taxes. Of the 1,278 cases that received the preferential gift tax rate for family business succession over the past three years, 522 involved owners who had run their companies for 10 to 20 years at the time of the transfer. If the revision takes effect, some will have to stay at the helm for up to 10 additional years to ease their inheritance tax burden. In one case, the owner would have to keep running the company until the age of 96. Those who have already handed over an entire business, fixing the length of their tenure, could be shut out of meeting the tighter requirements altogether.
Corporate succession does not end with the transfer of shares or tangible assets such as land and factories. The founder's expertise and the brand must also carry over if manufacturers are to keep their competitive edge. The government should reflect views from the field, revise excessive tightening measures and set out transitional arrangements for companies that began succession planning in reliance on the existing rules. It should also consider widening the scope of support beyond relatives to employees and third parties, granting benefits comparable to those for family succession. The survival of the company and the preservation of jobs should be the standard for support. Blocking business continuity should not be the price of stopping irregular transfers of wealth. Unless Korea widens the exit routes for succession, it risks following Japan, where aging owners and the absence of successors drove a rise in closures among smaller firms and weakened the manufacturing base.