Corporate Governance Forum: "Korea Zinc's Extraordinary General Meeting Lowers National Prestige... Control Rights Competition Must Be Allowed"

The Korea Corporate Governance Forum recently criticized the exclusion of Youngpoong's voting rights at the temporary shareholders' meeting of Korea Zinc, stating, "the hope for 'Korea's stock market entering the advanced market,' which the government, the National Assembly, and the entire nation have earnestly wished for, was brutally trampled upon."

On the 31st, Namwoo Lee, chairman of the Korea Corporate Governance Forum, said, "This case shows the limitations of the Fair Trade Commission, which has focused on regulations centered on large corporations, in addressing governance issues."

Earlier, on the 23rd, a day before the temporary shareholders' meeting considered a turning point in the Korea Zinc management dispute, Yoonbeom Choi, chairman of Korea Zinc, announced a surprise transfer of 10% of Youngpoong's shares to Korea Zinc's overseas subsidiary, Sun Metal Corporation (SMC).

On the 23rd, when the temporary shareholders' meeting of Korea Zinc was held, Korea Zinc shareholders were lining up to enter the shareholders' meeting hall at the Grand Hyatt Seoul in Jung-gu, Seoul. Photo by Jo Yong-jun

Regarding this, Chairman Lee stated, "This incident also occurred due to the extreme undervaluation of the top company's price-to-book ratio (PBR) at 0.2 times and the chronic problem of dual listing in the Korean stock market," adding, "the act of forcibly seizing shareholders' voting rights, thereby undermining the existence of the stock company, the use of corporate personality?which includes company assets and legal capacity?for the private interests of a specific shareholder, and the timing of the share transaction set the day before the shareholders' meeting to nullify shareholders' injunction rights all seriously infringe upon shareholder interests."

He also called for responses from the Fair Trade Commission and financial authorities. Article 21 of the current Fair Trade Act prohibits domestic companies belonging to mutual investment-restricted business groups from acquiring or owning shares of domestic affiliates. Chairman Lee stated, "It appears that Korea Zinc deliberately acquired 10% of Youngpoong's shares under the name of its 100% subsidiary in Australia, SMC, to avoid the application of the mutual investment prohibition under the Fair Trade Act." He added, "Recognizing mutual shares for foreign corporations based on Article 369, Paragraph 3 of the Commercial Act at the temporary shareholders' meeting seems problematic. Stock companies are established based on Korean law, but SMC, a foreign corporation, is not based on Korean law, so the applicability of the Commercial Act is unclear."

Furthermore, he said, "Recently, as LG, Doosan, and Hyundai Motor have pushed forward with local listings of overseas subsidiaries that infringe on parent company shareholders' interests, it is highly likely that many mutual investment-restricted business groups centered on large corporations will unjustly expand family control through mutual investments using foreign subsidiaries."

He emphasized the need to strengthen legal remedies for shareholders. Chairman Lee said, "There is a growing need for an emergency injunction system that can issue injunctions immediately without hearing the opposing party when events occur just before the shareholders' meeting, similar to an emergency room in a hospital, and a rapid injunction system that can correct issues within a day or two even after the shareholders' meeting." He added, "The Delaware courts in the United States effectively serve as specialized corporate law courts, but Korea lacks specialized commercial courts, making it difficult for shareholders to receive prompt and expert remedies even when harmed. The establishment of specialized commercial courts should be actively considered."

Additionally, Chairman Lee stated, "Previously, the OECD (Organisation for Economic Co-operation and Development) concluded in an official report that 'competition for control must be allowed (based on efficiency and transparency).' It also criticized existing management and boards for opposing third-party control attempts to avoid responsibility by entrenching themselves." He added, "Since the OECD emphasized the duties of care and loyalty of the board of directors of the acquired company, we recommend that both the existing and new directors of Korea Zinc prioritize the interests of all shareholders according to their fiduciary duties rather than serving the private interests of specific shareholders."

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