The court dismissed Yeongpung's injunction request to halt the tender offer for treasury shares filed against Korea Zinc. The court judged that at this stage, the right to be preserved and the necessity of preservation were not sufficiently demonstrated to warrant a provisional injunction.
On the 21st, the Civil Division 50 of the Seoul Central District Court (Presiding Judge Kim Sang-hoon) made this decision regarding Yeongpung's injunction request to suspend the tender offer procedure filed against Choi Yoon-beom, chairman of Korea Zinc.
Yeongpung filed the injunction request to block Korea Zinc's tender offer of treasury shares at 890,000 KRW per share from the 4th to the 23rd of this month. Yeongpung argued that Korea Zinc’s directors pushing for the tender offer of treasury shares violates the Capital Markets Act, the Commercial Act, and Korea Zinc’s articles of incorporation, and constitutes breach of duty and violation of directors’ duties of loyalty and care under the Commercial Act.
The court first ruled, “There is no provision in the Capital Markets Act or the Commercial Act that requires deducting voluntarily reserved funds arbitrarily set by the company when calculating the acquisition limit of treasury shares, as Yeongpung claims.” It also stated, “Even if the tender offer did not go through a shareholders’ meeting resolution, it cannot be considered a violation of the Capital Markets Act.”
The court also rejected Yeongpung’s claim of breach of duty. The court noted, “Yeongpung raised the purchase price from the initial 660,000 KRW to 880,000 KRW during the preceding tender offer process,” and added, “It is difficult to clearly determine the appropriate stock price of Korea Zinc at this stage.”
Furthermore, the court emphasized, “Even if the tender offer price for treasury shares is higher than the market price, considering that the tender offer does not violate the principle of shareholder equality, and that the Commercial Act limits it to distributable profits, thus not infringing the principle of capital maintenance, it cannot be concluded that Korea Zinc’s directors’ decision to set a purchase price higher than the market price constitutes breach of duty, especially since all purchased treasury shares are to be canceled.”
The court concluded, “As long as Korea Zinc complies with various procedures under the Commercial Act and the Capital Markets Act, even if the purpose of the treasury share tender offer includes defense of management rights, it cannot be deemed illegal. Based on the materials submitted by Yeongpung so far, it is insufficient to prove that the tender offer constitutes breach of duty or violation of directors’ duties of loyalty or care.”
In this second injunction lawsuit, a key issue was whether Korea Zinc’s treasury share tender offer was for the benefit of the entire company or for the current management, including Chairman Choi.
Yeongpung and Korea Zinc sharply clashed over specific points such as whether the tender offer at 890,000 KRW per share harms the company, whether the directors who made this decision violated their duty of care, whether voluntarily reserved funds can be included within distributable profits by board resolution alone to be used as treasury share acquisition funds, and whether the tender offer excluding the largest shareholder Yeongpung violates the principle of shareholder equality.
Previously, Yeongpung filed an injunction request to prevent Korea Zinc from acquiring treasury shares during the tender offer period (from the 13th of last month to the 4th of this month), claiming it was to secure management rights, but the court dismissed it on the 2nd.
Yeongpung, MBK Partners, and the current management led by Chairman Choi are engaged in a battle to secure shares over the management rights of Korea Zinc, the world’s number one non-ferrous metal smelting company. With the court’s decision allowing the continuation of the “treasury share purchase,” Korea Zinc is expected to continue the scheduled tender offer until the 23rd and make every effort to secure voting rights.
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