Preliminary Injunction Granted... Choi Yoon-beom's Battle to Retain Control of Korea Zinc Faces Thorny Path

Cumulative Voting System Blocked by Court Decision
Korea Zinc Must Convince Minority Shareholders Before Temporary Shareholders' Meeting
Maximum Effort Needed to Prevent Youngpoong Personnel from Joining the Board

The court accepted MBK Partners and Youngpoong's (hereinafter MBK Alliance) injunction request to prohibit the proposal to appoint directors through cumulative voting at the temporary shareholders' meeting of Korea Zinc, dealing a blow to Chairman Choi Yoon-beom, who was trying to defend his management rights. With the failure to introduce the cumulative voting system, which was considered the first line of defense, Chairman Choi and Korea Zinc are now in a position where they must persuade foreign investors, institutions, and minority shareholders during the remaining period to block the entry of Youngpoong's personnel into the board of directors as much as possible.

The Seoul Central District Court Civil Division 50 (Chief Presiding Judge Kim Sang-hoon) on the 21st accepted Youngpoong's injunction request to prohibit the proposal at Korea Zinc's temporary shareholders' meeting. The court stated, "At the time when Yumi Development requested cumulative voting, Korea Zinc's articles of incorporation explicitly stipulated that the cumulative voting system does not apply," and "Therefore, this cumulative voting request violates the Commercial Act and cannot be considered a legitimate request."

As a result of the court's decision, the proposals to appoint directors through cumulative voting, assuming the approval of the articles of incorporation amendment to introduce the cumulative voting system, namely proposals No. 2 and No. 3, cannot be submitted. Proposals No. 4, 'Appointment of directors assuming the maximum number of directors is 19,' and No. 5, 'Appointment of directors assuming no limit on the number of directors,' can be submitted.

However, the articles of incorporation amendment to set a limit on the number of directors (proposals No. 1 and No. 2) requires a special resolution at the shareholders' meeting, meaning two-thirds of the attending shareholders must agree. Since the MBK Alliance holds 46.7% of the voting rights, the proposal is structured to be rejected. Accordingly, proposal No. 4, 'Appointment of directors assuming the maximum number of directors is 19,' will be discarded, and only proposal No. 5, 'Appointment of directors assuming no limit on the number of directors,' is expected to be submitted.

Previously, Korea Zinc recommended seven director candidates, while the MBK Alliance proposed 14 candidates. At the temporary shareholders' meeting on the 23rd, the appointment of these candidates will be decided based on a majority vote system. At this point, it is highly likely that all 14 director candidates from the MBK Alliance will enter the board. Although the MBK Alliance's voting rights fall short of a majority, considering the shares of foreign institutional investors such as the Norwegian Pension Fund who have already exercised their voting rights and the attendance rate at the shareholders' meeting, achieving 50% is expected to be straightforward.

If all 14 MBK director candidates succeed in entering the board, the number of MBK Alliance personnel on the Korea Zinc board will increase from one (Jang Hyung-jin, Youngpoong advisor) out of the current 12 directors to 15. Korea Zinc must persuade institutional and minority shareholders during the remaining period to block the entry of MBK personnel into the board and pass at least one more director candidate they recommend to secure their future.

Choi Yoon-beom, Chairman of Korea Zinc. Photo by Kim Hyun-min

A Korea Zinc official said, "Winning the hearts of minority shareholders is the most important goal," adding, "We will try to gain their support by informing shareholders about shareholder-friendly policies and measures." He further explained, "Currently, the casting voters are minority shareholders and the National Pension Service, so the outcome depends on their decisions."

On the other hand, Youngpoong and MBK, who blocked the introduction of the cumulative voting system, are optimistic about their ability to control the board. A Youngpoong official said, "Since the usual director appointment procedure will be followed, we expect all 14 directors we recommended to be appointed," adding, "We will persuade shareholders by highlighting Korea Zinc's flawed governance and the current chairman's alleged mismanagement."

The MBK Alliance also issued a statement after the court's decision, saying, "We respect the court's acceptance of the injunction and consider it a natural outcome," and "This court decision signals the start of governance reform at Korea Zinc, and we expect that through the temporary shareholders' meeting on the 23rd, the board restructuring and the introduction of an executive officer system will begin, leading to substantial improvements in Korea Zinc's governance."

The cumulative voting system, which was blocked by the court's decision, was a de facto 'hidden card' for Chairman Choi and the current Korea Zinc management to defend their management rights. If introduced, shareholders could concentrate their voting rights on specific director candidates, allowing minority shareholders supporting Chairman Choi to focus their votes. With Korea Zinc's voting rights at only 39.16%, it was a stronghold that could block the entry of directors favored by the MBK Alliance.

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