The Effectiveness of Korea Zinc's Extraordinary General Meeting of Shareholders to Be Ruled Today... A Pivotal Moment Determining the Outcome

by Lee Minwoo

by Lee Seungjin

Published 07 Mar.2025 08:38(KST)

Updated 07 Mar.2025 15:33(KST)

Ruling May Come as Early as This Morning... Mutual Shareholding Regulation at the Center
If Granted, Youngpoong and MBK Likely to Take Board Control at March Shareholders' Meeting
If Dismissed, Dispute Could Drag On for Years with Additional Lawsuits
Public Criticism of MBK over Homeplus Crisis Emerges as a New Variable

The provisional injunction result to suspend the effectiveness of the temporary shareholders' meeting of Korea Zinc is expected to be announced soon. Depending on the outcome, the management dispute between Chairman Choi Yoon-beom of Korea Zinc and Youngpoong·MBK Partners is likely to become distinctly clear.

According to the investment banking (IB) industry on the 7th, the Seoul Central District Court is scheduled to make a final ruling on the provisional injunction to suspend the effectiveness of the Korea Zinc temporary shareholders' meeting filed by Youngpoong·MBK as early as this morning.

There are three provisional injunctions filed by Youngpoong·MBK: ▲a provisional injunction to suspend the effectiveness of the temporary shareholders' meeting resolution excluding Youngpoong's voting rights ▲a provisional injunction seeking suspension of the duties of directors appointed by the temporary shareholders' meeting resolution ▲a provisional injunction requesting the agenda to include Youngpoong·MBK's shareholder proposal in the regular shareholders' meeting agenda.

The key issue is whether the method of Korea Zinc's subsidiary Sun Metal Corporation (SMC) purchasing Youngpoong shares to create a circular shareholding structure and thereby triggering the 'mutual shareholding regulation' under the Commercial Act to restrict voting rights is valid. The application of the law is expected to differ depending on whether SMC is a limited company or a stock company.

If the court accepts the provisional injunction, the voting rights of Youngpoong shares, which Chairman Choi's side had restricted through the 'mutual shareholding regulation' method, will be restored. In this case, since the previous temporary shareholders' meeting results limiting the number of shareholders would be invalid, there is a high possibility that many director candidates recommended by Youngpoong·MBK will be appointed at the regular shareholders' meeting scheduled for the end of this month. As Youngpoong·MBK takes control of the board of directors, the momentum will shift in their favor.

There is also a possibility of partial acceptance. Not all agenda items from the previous temporary shareholders' meeting would be invalidated, but only some would lose their effect. An IB industry insider explained, "Regarding the first agenda item, the cumulative voting system, the National Pension Service also supported it, and from the perspective of protecting minority shareholders' voting rights, the court may accept its validity. Other agenda items are more directly related to the management dispute between both sides rather than the value of minority shareholders, so the court may invalidate all of them and order them to be contested again at the shareholders' meeting."

If the injunction is dismissed, the dispute is expected to be prolonged. First, the Korea Zinc board of directors will remain controlled by Chairman Choi's side. If Youngpoong refuses to accept the court's decision and files a main lawsuit, it is expected to take at least over a year. If the Korea Zinc management dispute enters a prolonged phase, it could impose a significant burden on Youngpoong·MBK, as the nature of the fund with a fixed maturity means that investors' dissatisfaction may grow if the investment remains stagnant without performance for a long time.

Meanwhile, while both sides are aggressively conducting public opinion battles and confident of victory, a variable has emerged. It is the corporate rehabilitation crisis of Homeplus, whose major shareholder is MBK. MBK's sudden initiation of Homeplus's corporate rehabilitation procedure has sparked fierce criticism. Homeplus suppliers who have not received payment have successively stopped supplying products, causing setbacks in Homeplus's normalization. MBK has explained that normal operations continue during the rehabilitation process and that sufficient cash flow will be generated by temporarily reducing interest burdens, but consumer and creditor concerns have not subsided. Considering that Chairman Choi Yoon-beom's management expertise was strongly criticized, this is seen as a self-contradiction.

The Korea Zinc extraordinary general meeting of shareholders held on the afternoon of January 23 at the Grand Hyatt Seoul in Yongsan-gu, Seoul is in progress. Photo by Jo Yong-jun