LocknLock, once South Korea’s top airtight container brand, is a well-known example of a company that struggled after being sold due to inheritance tax. Founded in 1978, LocknLock became popular in South Korea, China, Vietnam, and India, even achieving success on U.S. home shopping channels. In 2004, it was the No. 1 brand in China. However, in 2017, founder Kim Joon-il sold the company to a private equity firm due to an inheritance tax burden exceeding 400 billion won ($276 million). The new Hong Kong-based owners focused on profits, selling most of the company’s factories and outsourcing production to Chinese manufacturers. Disappointed by the shift to China-made products, consumers turned away. LocknLock’s revenue, which was 543 billion won ($374 million) in 2021, fell by 38% over three years, leading to losses in 2023. The company even delisted from the stock market last year.
Many South Korean small and mid-sized businesses face similar struggles, forced to sell or close due to high inheritance taxes. Some strong companies have declined or disappeared as a result.
A survey by the Korea International Trade Association (KITA) of 799 small business owners found that 42.2% had considered selling or shutting down their businesses due to inheritance tax concerns. Nearly half of SME owners in South Korea worry about passing down their businesses because of heavy tax burdens.
Three Seven (777), the world’s No. 1 nail clipper manufacturer, also suffered after being sold due to inheritance tax. Founded in 1975, the company never recorded a loss for 33 years. But after founder Kim Hyung-kyu passed away in 2008, his family and executives couldn’t afford the 15 billion won inheritance tax and sold their shares to pharmaceutical firm JW Holdings. The company’s performance dropped, and JW Holdings sold it to TH Holdings the next year. Three Seven’s revenue, which was 30 billion won in 2003, had fallen to 16 billion won by 2023.
Hanssem, South Korea’s largest furniture and interior design company, was sold to a private equity firm in 2021 because founder Cho Chang-gul had no direct successor and faced a massive inheritance tax. The company posted losses after the sale and, though it returned to profit in 2023, its revenue remains lower than before.
Unidus, once the world’s top condom manufacturer, also collapsed due to inheritance tax. Founded in 1973, the company was sold after the founder’s death in 2015. It changed names multiple times, becoming BioGenetics, Kyungnam BioPharma, Blueberry NFT, and Blade Entertainment, while trying to diversify but failed to find success.
With more cases like these, small business leaders are calling for tax reforms to prevent strong companies from struggling during succession. Choo Moon-gab, head of economic policy at the Korea Federation of SMEs, said, “Many SMEs were founded in the 1980s and 1990s and are now at the succession stage. If inheritance tax is not revised, many promising companies will be sold overseas or taken over by private equity firms.”
