Young Poong: "Defending Management Control with Company Funds"... Korea Zinc: "It's Just a Shareholder Meeting Advisory Contract" (Comprehensive)

Young Poong Files Complaint Against Chairman Choi Yoonbum and CEO Park Gideok

Young Poong has filed a complaint against Choi Yoonbum, Chairman of Korea Zinc, Park Gideok, CEO, and Lee Sangmok, CEO of Act, accusing them of defending management control using company funds. In response, Korea Zinc has strongly refuted the allegations, claiming that Young Poong is distorting the shareholder meeting advisory contract and making unreasonable assertions.

On September 11, Korea Zinc issued a statement regarding Young Poong's complaint, saying, "Despite having already explained our position on the circumstances surrounding the advisory contract with the shareholder meeting consulting firm, Young Poong continues to repeat one-sided, distorted claims and has even filed a complaint to sway public opinion," adding, "We deeply regret what we see as a deliberate attempt to damage our reputation."

Korea Zinc explained on September 3 that "among the various services provided by the firm, we only entered into a contract for advisory services related to the shareholder meeting," and added, "We received consulting services for the successful operation of Korea Zinc's shareholder meeting and for developing shareholder-friendly agenda items, especially for minority shareholders. Based on this, we received strong support from shareholders at the last meeting for proposals such as appointing an outside director as chairman of the board and introducing cumulative voting, both of which were shareholder-friendly initiatives."

Earlier that day, Young Poong announced through law firm KL Partners that it had filed a complaint with the Yongsan Police Station in Seoul against Chairman Choi, CEO Park, and CEO Lee for alleged violations of the Commercial Act and the Act on the Aggravated Punishment of Specific Economic Crimes. Young Poong claimed that Chairman Choi and CEO Park used company funds to provide undue benefits for the purpose of defending management control at the shareholder meeting, and that CEO Lee received these benefits.

According to the complaint, Chairman Choi and CEO Park signed a consulting contract with Act in April of last year, worth 400 million won annually and totaling 800 million won over two years. Through this contract, Act established and operated the Korea Zinc Minority Shareholder Alliance, collected shareholder meeting proxy forms, managed the electronic proxy system, and secured friendly forces.

The Young Poong side believes these actions are in direct violation of the Commercial Act. Article 634-2, Paragraph 1 of the Commercial Act prohibits company directors or executives from providing financial benefits using company funds in connection with the exercise of shareholders' voting rights. A Young Poong representative pointed out, "This contract is merely a tool for the executives to protect their own positions and is unrelated to the interests of the company as a whole."

They also took issue with CEO Lee entering into such a contract and receiving funds from Korea Zinc. Article 634-2, Paragraph 2 of the Commercial Act prohibits receiving benefits in connection with the exercise of voting rights at shareholder meetings.

Young Poong further argued that this case is not simply a violation of the Commercial Act, but also constitutes breach of duty under the Act on the Aggravated Punishment of Specific Economic Crimes. They claim that using company funds for the personal purpose of defending management control caused harm to the company. The complaint also states, "Korea Zinc's funds should be used for the joint interests of the company and its shareholders, but Chairman Choi and CEO Park diverted them for personal use," adding, "This clearly constitutes breach of duty."

Young Poong also plans to raise the issue that Act, Korea Zinc, and KZ Precision (formerly Young Poong Precision) violated the proxy solicitation system under the Capital Markets Act. According to a document drafted in February, Act contacted numerous shareholders regarding agenda items for the Korea Zinc and Young Poong shareholder meetings without distributing proxy forms or reference materials, and Korea Zinc and KZ Precision did not designate Act as an agent for proxy solicitation. This constitutes a violation of Article 152 of the Capital Markets Act, and Young Poong claims this could result in regulatory sanctions by financial authorities, such as correction orders or suspension of solicitation, as well as potential criminal penalties for false reporting.

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