Tomorrow's Goryeo Zinc Injunction Hearing...The Fate of the Extraordinary General Meeting on 'Cumulative Voting System and Outside Director Appointment'

Provisional Injunction to Suspend Duties of Seven Outside Directors Consolidated
Key Issues: Legal Status of SMC and Applicability of the Commercial Act

The provisional injunction hearing requested by the Youngpoong-MBK Partners (MBK alliance), who are engaged in a management rights dispute with Korea Zinc, to suspend the validity of the extraordinary general meeting of shareholders held without Youngpoong's voting rights, will be held on the 21st. There is a possibility that the management rights dispute structure of Korea Zinc could be reversed overnight depending on the court's decision.

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

According to industry sources on the 20th, the provisional injunction hearing to suspend the resolution of the extraordinary general meeting of shareholders requested by Youngpoong, the largest shareholder of Korea Zinc, against Korea Zinc will be held on the morning of the 21st at the Seoul Central District Court. The MBK alliance's request on the 3rd for a provisional injunction to suspend the duties of the seven outside directors appointed at the extraordinary general meeting has also been consolidated with the case to suspend the validity of the shareholders' meeting resolution.

If the court rules to suspend the validity of the extraordinary general meeting after the hearing, the management rights dispute will tilt back in favor of the MBK alliance. Conversely, if the injunction is dismissed, the directors proposed by Korea Zinc will remain appointed, creating a favorable environment for Korea Zinc. The industry expects Chairman Choi to officially begin consolidating management rights.

The key issue in this provisional injunction lawsuit is the legal nature of Sun Metal Corporation (SMC), a grandchild company of Korea Zinc, under the Commercial Act. Whether SMC is a stock company or a limited company determines the effectiveness of the 'mutual share voting rights restriction card' raised by Chairman Choi's side. Under the Commercial Act, mutual share voting rights restrictions apply only to stock companies.

Youngpoong argues that SMC is a foreign company with the characteristics of a limited company and does not fall under the category of a quasi-foreign company under the Commercial Act. On the other hand, Korea Zinc counters that "SMC is a type of stock company under Australian company law, characterized by capital, shares, and limited liability of shareholders."

Whether the foreign corporation SMC is subject to Korean Commercial Act is also a major issue. Korea Zinc has argued, "The foreign company provisions in the Commercial Act are intended to regulate and supervise the domestic activities of foreign companies operating in Korea, and whether a foreign company overseas is included in the mutual share regulation related to voting rights exercised by Korea Zinc, a domestic stock company, is irrelevant."

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

Earlier, on the 22nd of last month, a day before the extraordinary general meeting, Chairman Choi's side created a circular shareholding structure by transferring 10.3% of Youngpoong shares held by Youngpoong Precision and the Choi family to SMC. As a result, at the shareholders' meeting on the 23rd, the voting rights of the 25.42% stake in Korea Zinc held by Youngpoong (based on issued shares) were restricted.

At the extraordinary general meeting at that time, Korea Zinc passed resolutions including the introduction of a cumulative voting system, setting an upper limit of 19 directors on the board, and the appointment of seven directors. The MBK alliance's shareholder proposals for the introduction of an executive officer system and the appointment of 14 outside directors were all rejected.

After the extraordinary general meeting, Youngpoong stated, "Considering the ripple effects of the cumulative voting system and the amendment to the articles of incorporation limiting the number of directors, which were resolved contrary to the original intent of the system, it is necessary to suspend the validity of this extraordinary general meeting resolution as soon as possible. Even if we accept the situation where Chairman Choi's side claims to have defended management rights at this extraordinary general meeting, there is no change in the status of Youngpoong and MBK Partners as the largest shareholders holding 46.7% of the voting rights."

Korea Zinc stated, "SMC acquired Youngpoong shares based on its own judgment and calculation, which was a lawful act, yet the MBK alliance is making baseless slanders alleging illegality. We are concerned whether they are more focused on obstructing and damaging corporate competitiveness while ignoring the importance of national key industries."

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