'Irregular Tactics Worked'... Choi Yunbeom Successfully Defends Goryeo Zinc Management Rights

Securing 18 Out of 19 Board Seats
MBK Alliance Signals Legal Battle
"We Will Resolve Issues According to the Law"

Chairman Choi Yoon-beom of Korea Zinc and the current management successfully defended their management rights at the extraordinary general meeting of shareholders held on the 23rd. All the personnel they proposed were appointed as directors, while all the personnel from the Yeongpung and MBK Partners (MBK Alliance) sides, who had been in conflict, were blocked from entering the board of directors.

The voting rights restriction measure on Yeongpung, introduced by Chairman Choi's side a day before the extraordinary general meeting, proved to be an effective last-minute reversal card. However, the MBK Alliance side announced plans to file a lawsuit, claiming that the voting rights restriction was essentially illegal, indicating that the management rights dispute between the two sides is likely to escalate into a legal battle.

On the 23rd, the day of the Korea Zinc extraordinary general meeting of shareholders, Korea Zinc shareholders are lining up to enter the shareholders' meeting hall at the Grand Hyatt Seoul in Jung-gu, Seoul. Photo by Jo Yong-jun

MBK's Attempt to Seize Control of Korea Zinc's Board Fails

At the extraordinary general meeting held at the Grand Hyatt Seoul Hotel in Yongsan-gu, Seoul, Korea Zinc put to a vote the "Amendment to the Articles of Incorporation Regarding the Setting of an Upper Limit on the Number of Directors," which was approved with 73.2% of the voting rights present in favor. This agenda item, proposed by Chairman Choi's side, sets the upper limit of the number of directors on Korea Zinc's board, which previously had no limit, to 19. With the approval of this upper limit, the number of director seats to be appointed at this meeting was limited to seven. Currently, Korea Zinc's board consists of 12 directors, of whom only one (Jang Hyung-jin, advisor to Yeongpung) is affiliated with the MBK Alliance.

The MBK Alliance initially planned to secure a majority by introducing 14 director candidates they recommended into the board at this extraordinary general meeting, thereby taking control of the board. However, the approval of the upper limit on the number of directors nullified this strategy. Furthermore, in the subsequent director appointments, all seven Korea Zinc-affiliated candidates were successfully elected to the board through voting, while all 14 MBK Alliance candidates were rejected, resulting in a bitter defeat.

Korea Zinc also approved the "Amendment to the Articles of Incorporation for the Introduction of Cumulative Voting," submitted as agenda item No. 1-1, with more than two-thirds of the voting rights present in favor. The cumulative voting system allows shareholders to allocate as many votes as the number of directors to be appointed and concentrate them on their preferred candidates. It is considered a measure to protect minority shareholders' interests and enhance management transparency.

Originally, the cumulative voting system was a "hidden card" introduced by Chairman Choi and others to block the MBK Alliance's recommended director candidates from entering the board. However, on the 21st, the court granted an injunction prohibiting the MBK Alliance's proposed agenda, so despite the approval at this meeting, the cumulative voting system can only be applied from subsequent shareholder meetings.

The Korea Zinc Extraordinary General Meeting of Shareholders is taking place on the afternoon of the 23rd at the Grand Hyatt Seoul in Yongsan-gu, Seoul. Photo by Jo Yong-jun

'Yeongpung Voting Rights Restriction' Effective as a Tactical Move

Until the morning of the previous day, the extraordinary general meeting was expected to favor the MBK Alliance. The court had blocked the introduction of the cumulative voting system, and the MBK Alliance's voting rights stake was 46.7%, close to a majority, leading to widespread analysis that the 14 director candidates they proposed would easily enter the board. Korea Zinc's side, with only 34.35% of voting rights, was in a situation where they had to block the MBK Alliance personnel from entering the board as much as possible and pass at least one candidate they recommended.

However, this situation changed when Chairman Choi's side took measures to restrict the voting rights of Yeongpung's Korea Zinc shares. Korea Zinc announced that its Australian subsidiary, Sun Metal Corporation (SMC), purchased approximately 190,000 Yeongpung shares, previously owned by Chairman Choi's family and Yeongpung Precision, for 57.5 billion KRW in an off-market transaction. The shares acquired by SMC, established through Sun Metal Holdings set up by Korea Zinc in Australia, account for 10.33% of Yeongpung's total shares. By creating a circular shareholding structure involving Korea Zinc, Sun Metal Holdings, SMC, Yeongpung, and back to Korea Zinc, they utilized the "mutual share voting rights restriction" system under the Commercial Act. This measure restricted the voting rights of 25.42% of Yeongpung shares within the MBK Alliance's stake, leaving only about 15.55% effective voting rights.

The MBK Alliance strongly opposed this, arguing that the mutual share voting rights restriction under the Commercial Act applies only to domestic corporations, so SMC does not fall under this regulation. However, it was insufficient to overturn the tilted situation. At the meeting, Yeongpung's lawyer Lee Seong-hoon said, "It was absurd to hear reports about voting rights being restricted, and hearing the same at the meeting made us feel robbed," and requested a postponement of the meeting. However, this request was ultimately rejected amid the voting rights restrictions.

The MBK Alliance reportedly considered proposing the replacement of the board chairman at the meeting. Since there was no time to file an injunction against Chairman Choi's voting rights restriction measure, the strategy seemed to be to buy time by changing the board chairman at the extraordinary general meeting. However, judging that there was no chance of success under the voting rights restrictions, they apparently did not make the proposal.

The MBK Alliance plans to take legal action, including filing for suspension of the extraordinary general meeting's effectiveness and a lawsuit to nullify the mutual share voting rights restriction. At the end of the meeting, the MBK Alliance issued a statement saying, "We regret the series of events that occurred at the extraordinary general meeting," and "We will make every effort to cancel and restore the illegal results of today's extraordinary general meeting through proper procedures." They added, "According to the capital market system and related laws, although it may take time and be painful, we will steadily work to resolve the issues ahead."

Moon Byung-guk (left), Chairman of the Korea Zinc Labor Union of the National Metal Workers' Union Federation, is talking with union members in front of the Korea Zinc extraordinary shareholders' meeting held on the 23rd at the Grand Hyatt Seoul in Jung-gu, Seoul. Photo by Jo Yong-jun

Disruption from the Start... Agenda Discussion Began After 6 Hours

The extraordinary general meeting experienced disruptions from the start. Originally scheduled to open at 9 a.m., the agenda discussion only began around 3:10 p.m., more than six hours later. The delay was due to Korea Zinc raising issues just before the meeting about 260 duplicate proxy forms related to 4,750 shares. Some shareholders who did not attend the meeting had signed proxy forms authorizing both Korea Zinc and the MBK Alliance to represent them.

The MBK Alliance raised suspicions about why Korea Zinc did not immediately disclose the number of shares present, suggesting that large corporations classified as Chairman Choi's allies did not attend the meeting. They also claimed that if Korea Zinc's friendly shareholders did not participate, the passage of the amendment to introduce the cumulative voting system would become uncertain, accusing Korea Zinc of deliberately disrupting the meeting. Amid these disputes, the 4,750 shares with duplicate proxies were ultimately invalidated.

Meanwhile, on one side of the meeting hall, the Korea Zinc labor union, wearing headbands reading "United Struggle," stood holding placards throughout the registration process. Every ten minutes, they shouted slogans such as "Let's prevent the overseas leakage of national core technology. We must protect Korea Zinc, a national core industry. Let's defend it." Their placards bore critical phrases against the MBK Alliance, such as "Speculative Capital MBK" and "Deficit Company Yeongpung."

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