MBK "Stop Protecting Choi Yoon-beom, Not Korea Zinc"

Criticism of the "Mutual Share Restriction" Tactic
Shareholders' Meeting Itself Deemed Unlawful... Legal Action Announced

The management rights dispute over Korea Zinc, which had been leaning towards Youngpoong and MBK Partners, has been settled with Chairman Choi Yoon-beom's side emerging victorious. This was because Chairman Choi's side succeeded with the 'mutual share restriction' strategy that limits voting rights by holding Youngpoong's shares through a subsidiary. Youngpoong and MBK announced they would respond with litigation, claiming that this method is illegal and that the resolutions made at the recent extraordinary shareholders' meeting are invalid.

On the 23rd, after the Korea Zinc extraordinary shareholders' meeting held at the Grand Hyatt Seoul in Yongsan-gu, Seoul, Youngpoong and MBK criticized, "Chairman Choi's side's claim of 'mutual shares,' which they themselves call a 'last resort,' is a makeshift and illegal act to avoid the imminent risk of losing the vote at the extraordinary shareholders' meeting."

The day before, Chairman Choi's side sold 10.33% of Youngpoong shares held by the Choi family to Korea Zinc's Australian subsidiary Sun Metal Corporation (SMC) in an over-the-counter transaction worth 57.5 billion KRW. According to 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. This limited the voting rights of Youngpoong's 25% stake in Korea Zinc. Although Youngpoong and MBK protested the illegality at the extraordinary shareholders' meeting, Korea Zinc proceeded with the board meeting while restricting Youngpoong's voting rights, passing the cumulative voting system and director appointments, thereby securing management rights.

Youngpoong and MBK stated, "Sun Metal Corporation (SMC), an Australian zinc smelting subsidiary, has absolutely no business need to acquire Youngpoong shares," and pointed out, "A company engaged in zinc smelting in Australia acquiring Youngpoong shares, which have no voting rights, while cleverly evading the circular shareholding regulations prohibited by Korea's Fair Trade Act, is to protect Chairman Choi Yoon-beom."

They also criticized, "Mutual shares whose voting rights are prohibited under the Commercial Act apply to domestic corporations, but SMC is a foreign corporation and a limited company," adding, "They wasted 57.5 billion KRW just to insist at the extraordinary shareholders' meeting that Youngpoong has no voting rights."

They also refuted Chairman Choi's justification for hostile mergers and acquisitions (M&A) defense. Youngpoong and MBK said, "Can a group that has always been the largest shareholder for over 50 years be called an 'enemy'? How can the largest shareholder acquire and merge the company they are the major shareholder of?" They emphasized, "The efforts of the largest shareholder group to improve governance should not be distorted as hostile M&A, causing harm to Korea Zinc and stakeholders including shareholders."

Kim Kwang-il, Vice Chairman of MBK Partners, said at the shareholders' meeting, "There is no point in staying any longer when you arbitrarily proceed with the meeting to mock the largest shareholder, shareholders, and the capital market," and left the meeting with Youngpoong President Kang Sung-doo after the vote on the appointment of the fourth director. They plan to claim that the meeting itself is illegal and invalid through future legal actions such as lawsuits.

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

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