MBK: "Goryeo Ayun Director Appointment Cumulative Voting Request Is Illegal"

MBK Partners, a private equity fund (PEF) involved in a dispute over the management rights of Korea Zinc, claimed on the 24th that the shareholder proposal by Chairman Choi Yoon-beom of Korea Zinc to appoint directors through a cumulative voting system is illegal.

In a statement released that day, MBK pointed out, "The proposal submitted by Yumi Development, owned by Chairman Choi Yoon-beom's family, as an agenda item for Korea Zinc's upcoming extraordinary general meeting of shareholders next month, is considered by legal experts to violate the Commercial Act and the Capital Markets Act."

The Commercial Act stipulates that in companies with total assets exceeding 2 trillion won, like Korea Zinc, shareholders can request the appointment of directors through cumulative voting unless otherwise specified in the articles of incorporation.

However, MBK argued that Korea Zinc's articles of incorporation originally include provisions excluding the cumulative voting system, thus not meeting the condition of "unless otherwise specified in the articles of incorporation."

The Commercial Act also requires that a request for director appointment by cumulative voting must be made at least six weeks before the shareholders' meeting date, but MBK emphasized that Yumi Development did not meet this deadline either.

MBK further claimed that Korea Zinc concealed Yumi Development's shareholder proposal until the 20th of this month, the deadline for determining shareholders eligible to exercise voting rights at the extraordinary general meeting, which poses legal issues.

MBK stated, "Because shareholders were unaware that the agenda to introduce the cumulative voting system and the appointment of directors by cumulative voting would be discussed at the shareholders' meeting, it negatively affected shareholders' judgment and restricted their exercise of shareholder rights."

MBK added, "If Chairman Choi Yoon-beom and his special affiliates, including Yumi Development, concealed the submission of the cumulative voting agenda and accumulated shares, they would have traded while possessing material non-public information not disclosed to other investors. This could raise concerns of market order disruption under the Capital Markets Act."

MBK, together with Youngpoong, the largest shareholder of Korea Zinc, plans to engage in a vote battle with Chairman Choi's side over key agenda items such as restructuring the board system at the extraordinary general meeting scheduled for the 23rd of next month to wrest control from Chairman Choi.

Yumi Development, a shareholder of Korea Zinc, is a company in which Chairman Choi's family holds more than 88% of the shares. The director appointment based on the cumulative voting system proposed by this company is interpreted as a favorable measure for Chairman Choi, who holds a smaller share than MBK and Youngpoong.

The cumulative voting system was originally designed to prevent the dominant shareholder's unilateral control. In the case of Chairman Choi's side, whose shares are fragmented among friendly shareholders and special affiliates, unlike the largest shareholders MBK and Youngpoong, this system can increase their voting power.

MBK criticized, "Chairman Choi's side is attempting to abuse the cumulative voting system to prolong the shareholder dispute and preserve their position in a situation unfavorable to them in the vote battle."

MBK and Youngpoong hold 46.7% of the shares based on voting rights. Chairman Choi's side is estimated to hold 39 to 40% of the shares.

This content was produced with the assistance of AI translation services.