MBK: "Even with the introduction of focused voting for Korea Zinc, minority shareholders cannot appoint directors"

MBK Partners and Youngpoong rebutted Chairman Choi Yoon-beom's claim on the 2nd that "the cumulative voting system is a system for minority shareholders," arguing that even if the cumulative voting system is introduced at Korea Zinc, minority shareholders would not be able to appoint directors they support.

Under the current shareholding structure where 80-90% of shares are concentrated among the top 12 shareholders, minority shareholders would need to hold more than 20% of voting rights to recommend new director candidates at the upcoming regular shareholders' meeting in March, which is practically impossible, they said.

The MBK Partners-Youngpoong alliance issued a press release on the day stating, "If the proposal to introduce the cumulative voting system is approved and the number of directors is limited to 19, considering the shareholdings of major shareholders, the entities able to appoint directors through cumulative voting would effectively be limited to the first and second largest shareholders, making it practically difficult for other minority shareholders to appoint directors."

They cited a formula from Volume 2 of the "Comprehensive Corporate Law (4th edition)" published by the Korean Society of Commercial Law, which calculates the minimum number of shares a minority shareholder must hold to appoint one director under the cumulative voting system.

According to the book, the number of shares (Xn) that a minority shareholder must hold to appoint n directors out of D directors to be elected at a shareholders' meeting is calculated by the formula 'Xn = [n * S / (D + 1)] + 1 share,' where S is the total number of voting shares present at the meeting.

For example, if a company has 120 issued shares and 100 voting shares attend the shareholders' meeting where 3 directors are to be appointed via cumulative voting, the minimum number of shares required to appoint one director is calculated as [100 * 1 / (3 + 1)] + 1, which equals 26 shares.

Applying this to Korea Zinc's January extraordinary general meeting and March regular general meeting, the extraordinary meeting offered no opportunity for minority shareholders to recommend director candidates, and assuming 100% attendance of 18,156,107 voting shares excluding treasury stock at the regular meeting, 3,631,222 shares would be required to appoint one new director.

Assuming the approval of the proposal to cap the number of directors at the January extraordinary meeting, four of the 19 directors on the board (excluding separately elected outside audit committee members) will retire at the March regular meeting, requiring the appointment of four new directors. The analysis shows that minority shareholders would need a substantial number of shares to successfully appoint one candidate, amounting to 20% of voting rights and 17.5% of total issued shares.

MBK and Youngpoong stated, "For a minority shareholder holding a 3% stake to appoint one director under the cumulative voting system, the board would need to be composed of more than 40 members, but Chairman Choi's side is trying to block this entirely by proposing a cap on the number of directors."

They added, "This outcome arises because 80-90% of Korea Zinc's shares are owned by the largest shareholder group (Youngpoong and MBK) and the second largest shareholder group (Chairman Choi's family and Hanwha and other friendly shareholders), making it practically difficult for minority shareholders to unite with a majority to include a specific director candidate on the board. In other words, in a structure where shares are concentrated among a few shareholders like Korea Zinc, the cumulative voting system is unlikely to work for the benefit of ordinary minority shareholders."

Furthermore, they said, "Despite knowing this, Chairman Choi's family company Yumi Development introduced the cumulative voting system for only one reason: to use it as a means to preserve Chairman Choi's position," adding, "The appointment of directors through cumulative voting not only violates the Commercial Act and the principle of shareholder equality but also results in infringement of minority shareholders' rights at Korea Zinc's shareholders' meetings."