Korea Zinc: "Shareholder Agreement Between Youngpoong and MBK Has Legal Defects... Must Be Halted"

Major Decision by Board of Directors Composed of Outside Directors
Korea Zinc Reported to Seoul Central District Prosecutors' Office for Breach of Trust Charges

Korea Zinc has raised the possibility that the shareholder agreement between Youngpoong and MBK Partners contains significant legal defects that could render it null and void, and has initiated legal action. The company claims that this agreement causes serious damage to Youngpoong and its shareholders, while benefiting only MBK Partners.

On the 6th, Korea Zinc stated, "It is clearly illegal that Youngpoong’s outside directors concluded a shareholder agreement with MBK Partners without a special resolution at the shareholders' meeting." Two CEOs of Youngpoong were both detained due to a major accident, and the board of directors, composed solely of outside directors, made a critical decision to dispose of more than half of Korea Zinc shares, which constitute a significant portion of Youngpoong’s company assets.

Previously, Korea Zinc’s Youngpoong Precision filed a complaint with the Seoul Central District Prosecutors' Office against Youngpoong’s advisor Jang Hyung-jin, three outside directors, MBK Partners, and Vice Chairman Kim Kwang-il on charges including breach of trust. The prosecution has assigned the case to the Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office, a special department, and is reviewing the related matters.

On March 19th, shareholders are entering the 'Korea Zinc Annual General Meeting' held at the Yeongpung Building Annex in Gangnam-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Korea Zinc also pointed out that the detailed terms and price of the call option in the shareholder agreement between Youngpoong and MBK have not been disclosed at all. The disclosed terms include that Youngpoong cannot dispose of Korea Zinc shares to a third party for 10 years, and after 10 years, MBK is granted a right of first refusal.

Additionally, MBK and Youngpoong are pushing for a public tender offer through high-interest short-term borrowings amounting to 2 trillion KRW, and plan to recover cash from Korea Zinc through high dividends, which was also criticized. A Korea Zinc official stated, "They have already prepared plans to sell some key assets and affiliates," and added, "In a situation where Youngpoong has accumulated deficits due to major accidents and environmental issues, Korea Zinc’s high dividends are essential for its survival."

Youngpoong Precision, along with its management and Korea Zinc’s management, plan to proceed with additional legal procedures such as various injunction applications and civil and criminal complaints, and will soon disclose detailed information about the newly initiated legal procedures.