Goryeo Zinc Launches Final Counterattack... MBK Calls for "Board Chair Replacement"

Korea Zinc Attempts to Restrict Youngpoong's Voting Rights with 'Mutual Share' Tactic
MBK: "Domestic Law Does Not Apply to Foreign Subsidiaries"
Plan to Propose Replacement of Board Chairman at Extraordinary Shareholders' Meeting

The side of Choi Yoon-beom, chairman of Korea Zinc, who is engaged in a management rights dispute with MBK Partners and Youngpoong, launched a dramatic counterattack a day before the extraordinary general meeting of shareholders. They utilized the 'mutual share restriction' system, which limits voting rights if both parties hold more than 10% of shares by transferring Youngpoong's shares to a subsidiary. MBK and Youngpoong opposed this, calling it an illegal attempt that shakes the capital market system. Since there is no time to file injunctions with the court, they plan to respond by replacing the chairman of the board at the shareholders' meeting.

On the 23rd, MBK and Youngpoong stated regarding Korea Zinc's last counterattack, "The mutual share restriction provision in the Commercial Act applies only between domestic corporations, so it does not apply in this case," and criticized, "Chairman Choi Yoon-beom's attempt is the worst trick to disrupt the extraordinary shareholders' meeting and mock the capital market."

Earlier, as the introduction of the cumulative voting system desired by Korea Zinc failed, the management rights dispute was evaluated to have effectively tilted in favor of MBK and Youngpoong. In response, Chairman Choi launched a final counterattack the day before. He sold Youngpoong's 10.33% stake, held by the Choi family and Youngpoong Precision, one of Korea Zinc's shareholders, to the Australian subsidiary Sun Metal Corporation (SMC) through an over-the-counter transaction worth 57.5 billion KRW.

As a result, a circular shareholding structure of ‘Korea Zinc → Sun Metal Corporation Holdings (SMH) → SMC → Youngpoong → Korea Zinc’ was formed, which, according to Chairman Choi's side, creates a 'mutual share' relationship that prevents exercising voting rights. Under the Commercial Act's 'mutual share restriction' system, if two companies hold more than 10% of each other's shares, they cannot exercise voting rights in the other company. Therefore, it is claimed that the voting rights of about 25% of Youngpoong's shares out of the approximately 40% Korea Zinc shares held by MBK and Youngpoong can be blocked.

MBK and Youngpoong opposed this, calling it a 'trick.' An MBK official pointed out, "The mutual share restriction applies only between domestic corporations, similar to how the Fair Trade Act's circular shareholding regulations do not apply to foreign companies." According to the disclosure by Youngpoong Precision on the Financial Supervisory Service's electronic disclosure system, SMC is a foreign company established in Australia and is a limited company, not a stock company.

With no time to spare, MBK and Youngpoong plan to propose replacing the chairman of the board at the extraordinary shareholders' meeting. A motion of no confidence in the chairman is not a dismissal of the executive holding the chairmanship but a kind of 'subsidiary motion' requesting that the agenda be entrusted to another executive instead of the current chairman on the day. Since it is a subsidiary motion, prior notice is not required. It can be submitted immediately at the meeting, and the chairman must present it to the general meeting for deliberation and resolution. Currently, the chairman of Korea Zinc's board is Park Ki-deok, president of Korea Zinc. Chairman Choi resigned from the chairmanship in November last year.

An MBK Partners official criticized, "An illegal act shaking the Fair Trade Act, such as the formation of new circular shareholding within the Youngpoong Group solely to defend Chairman Choi's management rights, has occurred," and added, "This transaction, carried out just hours before the extraordinary shareholders' meeting, may involve various illegal acts such as violations of the Foreign Exchange Transactions Act and breach of fiduciary duty."

Choi Yoon-beom, Chairman of Korea Zinc, is speaking at a Korea Zinc press conference held on the 13th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. On this day, Chairman Choi stated, "I will step down from the position of chairman of the board as soon as possible, and an outside director will take over as chairman of the Korea Zinc board." Photo by Kim Hyun-min

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