Korea Zinc Repeatedly Forms Cross-Shareholding Ahead of Regular General Meeting... "Yeongpung Voting Rights Restricted"

10.3% of Yeongpung Shares Held by Grandchild Company SMC
Transferred as In-Kind Dividend to Subsidiary SMH
Amid Controversy Over SMC's Qualification as a Limited Company
"SMH is a Stock Company Under Australian Law," Korea Zinc Asserts

On the 12th, it was reported that Choi Yoon-beom, chairman of Korea Zinc, once again took measures to restrict the voting rights of Yeongpung's shares in Korea Zinc.

Korea Zinc announced that its Australian subsidiary and corporation, Sun Metal Holdings (SMH), received a 10.3% stake in Yeongpung held by Sun Metal Corporation (SMC) as a stock dividend in kind. Korea Zinc claimed that this established a new cross-shareholding relationship between Korea Zinc and Yeongpung.

Korea Zinc stated, "At the upcoming regular shareholders' meeting of Korea Zinc at the end of this month, Yeongpung's voting rights will still be restricted," adding, "As the parent company of SMC, SMH has also laid the groundwork to protect corporate value and growth drivers from hostile mergers and acquisitions (M&A) by MBK Partners and Yeongpung, thereby safeguarding the interests of all stakeholders."

SMH is a holding company in Australia that manages zinc smelting and renewable energy businesses. SMH is a wholly owned subsidiary of Korea Zinc, which holds 100% of its shares, and it also holds 100% of SMC's shares.

Previously, Korea Zinc disclosed that on January 22, the day before the last extraordinary shareholders' meeting, it formed a circular shareholding structure of 'Korea Zinc → SMC → Yeongpung → Korea Zinc' through SMC. Based on this, the voting rights of Yeongpung in Korea Zinc were restricted at the extraordinary shareholders' meeting.

According to current commercial law, if Company A holds more than 10% of the shares of Company B either directly or through subsidiaries or sub-subsidiaries, the shares that Company B holds in Company A lose their voting rights.

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

However, on the 7th, the court partially accepted the injunction application filed by Yeongpung and MBK against the resolution of Korea Zinc's extraordinary shareholders' meeting, ruling that restricting Yeongpung's voting rights through circular shareholding was illegal. In the judgment, the court stated that to restrict voting rights through circular shareholding, all related companies must be stock companies under commercial law, but "it is clear that SMC is not a stock company established under commercial law."

Korea Zinc argued that this stock dividend in kind was lawfully conducted following the procedures prescribed by Australian company law after consultation with an Australian law firm, asserting, "There is no dispute that SMH is a 'Public Company Limited by Shares' under Australian company law and thus qualifies as a stock company."

Industry insiders interpreted that Korea Zinc pushed forward with this additional circular shareholding because the court on the 7th focused on the qualification as a 'stock company' rather than the circular shareholding itself. It is expected that processes similar to previous injunctions suspending effectiveness will be repeated.

This is not the first time Korea Zinc has sparked such controversy. Last year, it withdrew a general public rights offering worth 2.5 trillion won after criticism arose that the interests of general shareholders were sacrificed, and the Financial Supervisory Service requested the submission of a corrected report, putting a brake on the plan.

Following an investigation that found this case to involve unfair trading, the Financial Supervisory Service referred the case to the prosecution, and an investigation is currently underway.

Regarding the circular shareholding used to restrict Yeongpung's voting rights at the January extraordinary shareholders' meeting, Korea Zinc is also under investigation by the Fair Trade Commission for alleged violations of the Fair Trade Act's prohibitions on mutual shareholding and circumvention acts, following reports from Yeongpung and MBK.

In a press release on the same day, Korea Zinc claimed, "In a situation where the success of MBK's hostile M&A raises concerns that Korea Zinc, SMH, and SMC could become a second Homeplus, this stock dividend in kind is a rational and legitimate business activity and a lawful act." Korea Zinc added that SMC decided on the stock dividend in kind through a board resolution the previous day, and SMH acquired 10.3% of Yeongpung's shares on the same day.

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