[Invest&Law] Korea Zinc-MBK·Yeongpung, Legal Battle Escalates Over Management Rights

MBK and Yeongpung Launch Tender Offer
Chairman Choi Yunbeom Faces Embezzlement Allegations First
Korea Zinc and Yeongpung Precision Take Legal Action

The management rights dispute between Korea Zinc and MBK Partners & Youngpoong is escalating into a legal battle. Korea Zinc has accused Youngpoong advisor Jang Hyung-jin, outside directors, MBK Partners who conspired with them, and Vice Chairman Kim Kwang-il of breach of trust during MBK and Youngpoong's tender offer process. MBK and Youngpoong, who initiated the tender offer, are raising issues regarding the illegality of Korea Zinc Chairman Choi Yoon-beom.

The first move came from Youngpoong. On the 13th, Youngpoong announced its tender offer plan and filed for a provisional injunction to inspect and copy Korea Zinc’s accounting books concerning allegations of breach of trust by Chairman Choi. The suspicions include breach of trust related to the One Asia Partners investment, involvement in market manipulation of SM Entertainment, suspicious high-price purchase of Ignio, and violations of the Commercial Act. Youngpoong claimed, "Since Chairman Choi took office as CEO of Korea Zinc, he has begun actions contrary to the co-founders' spirit of partnership, violating the Commercial Act and related laws, as well as breaching his duty of care."

Korea Zinc responded through Youngpoong Precision. Youngpoong Precision, a major affiliate of Korea Zinc, filed a complaint with the Seoul Central District Prosecutors' Office on the 20th against advisor Jang, three non-standing outside directors of Youngpoong, and MBK Partners Vice Chairman Kim Kwang-il on charges including breach of trust. Youngpoong Precision, a Youngpoong shareholder (4.39%), claimed that they caused significant damage to Youngpoong through an "illegal secret collusion" and requested an investigation. Korea Zinc is considering legal actions such as defamation suits. They explained that all necessary procedures were followed according to relevant laws and internal regulations during the decision-making process for the One Asia Partners investment, and that there are currently no indictments or trials against Korea Zinc regarding the SM Entertainment investment.

Korea Zinc plans to hold Youngpoong accountable both civilly and criminally through all legal procedures, including injunctions for inspection and copying of accounting books, provisional suspension of duties for Youngpoong directors, and complaints to supervisory authorities for violations of the Capital Markets Act.

Meanwhile, on the 25th, Youngpoong filed a complaint with the Seoul Central District Prosecutors' Office against Korea Zinc Chairman Choi Yoon-beom and Vice Chairman Noh Jin-su for breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes (breach of trust in the course of business). Youngpoong explained that it judged Korea Zinc suffered huge losses in the investment in One Asia Partners and overseas subsidiary Ignio Holdings, as well as in the interior contract process with C.S. Design Group (now The Boundary), and has taken legal action accordingly.