Korea Zinc Shareholders' Meeting Virtually Disrupted... Delayed Over 2 Hours

Strong Opposition to Choi Yoon-beom's Voting Rights Restriction
"Illegal Acts... Korea Zinc Has Caused Disruption"
MBK Side Expected to Propose Board Chairman Replacement

The temporary shareholders' meeting scheduled for the 23rd, considered a crucial turning point in the management rights dispute over Korea Zinc, is effectively heading towards disruption. While Chairman Choi Yoon-beom's Korea Zinc side has taken measures to restrict the voting rights of Korea Zinc shares held by the Youngpoong-MBK Partners (hereafter MBK Alliance), who are pushing to acquire management rights, the MBK Alliance has labeled these actions illegal, hinting at a breakdown. The shareholders' meeting, scheduled for 9 a.m. that day, is also delayed due to the verification of the shareholder registry and proxy documents.

The Korea Zinc temporary shareholders' meeting, which was to be held at the Grand Hyatt Seoul in Yongsan-gu, Seoul, has still not commenced as of 11 a.m. A Korea Zinc official stated, "The process of verifying proxies by shareholders and the company side is continuously delayed," adding, "We are calling shareholders to confirm duplicate proxies." The official further said, "We are trying to complete everything by noon so that the shareholders' meeting can start."

Korea Zinc Shareholders' Meeting Virtually Disrupted... Delayed Over 2 Hours

On the 23rd, the day of the Korea Zinc extraordinary general meeting of shareholders, Korea Zinc shareholders are lining up to enter the shareholders' meeting hall at the Grand Hyatt Seoul in Jung-gu, Seoul. Photo by Jo Yong-jun

The MBK Alliance is reportedly planning to propose replacing the chairman of the board at this shareholders' meeting. A motion of no confidence in the chairman is not a dismissal of the executive holding the chairmanship but a kind of 'subsidiary motion' requesting that the agenda items be handled by another executive instead of the current chairman on the day. Therefore, prior notice is not required, and it can be submitted directly at the meeting. The chairman must present this motion to the general meeting for deliberation and resolution. Since there is no time to file an injunction against Chairman Choi's restriction of voting rights with the court, the strategy appears to be to buy time by changing the chairman of the board at the temporary shareholders' meeting.

Currently, the chairman of Korea Zinc's board is Park Ki-duk, president of Korea Zinc. Chairman Choi resigned from the chairmanship in November last year. An MBK Partners official said, "Illegal acts shaking the Fair Trade Act, such as the formation of new circular shareholdings within the Youngpoong Group solely to defend Chairman Choi's management rights, have occurred," adding, "This transaction, conducted just hours before the temporary shareholders' meeting, may involve violations such as foreign exchange law breaches and breach of fiduciary duty." Another MBK Partners official said, "This is a declaration of disruption, refusing to conduct the shareholders' meeting properly at Korea Zinc," and "We consider such actions illegal."

Originally, the agenda for this shareholders' meeting included discussions on ▲ the introduction of cumulative voting, ▲ setting an upper limit on the number of directors, ▲ director appointments, ▲ stock split of issued shares, ▲ introduction of an executive officer system, ▲ protection for minority shareholders, ▲ change of dividend record date, and ▲ introduction of quarterly dividends. Among these, the director appointment agenda was considered the highlight of the meeting, which would determine the outcome of the management rights dispute. Previously, the MBK Alliance proposed 14 director candidates, and if all were appointed, the MBK Alliance would secure a majority on the board. Currently, Korea Zinc's board has 12 directors, with only one (Jang Hyung-jin, Youngpoong advisor) affiliated with the MBK Alliance. For Chairman Choi and Korea Zinc's side, it was a situation where they had to block MBK Alliance members from entering the board and get at least one of their seven recommended candidates approved to defend management rights.

However, this situation changed when Chairman Choi's side took measures to restrict the voting rights of Youngpoong's Korea Zinc shares. Korea Zinc announced that its Australian subsidiary, Sun Metal Corporation (SMC), purchased approximately 190,000 shares of Youngpoong stock, previously owned by Chairman Choi's family and Youngpoong Precision, for 57.5 billion KRW in an over-the-counter transaction. The shares acquired by SMC, established through Sun Metal Holdings set up by Korea Zinc in Australia, account for 10.33% of Youngpoong's total shares. By creating a circular shareholding chain involving Korea Zinc, Sun Metal Holdings, SMC, Youngpoong, and back to Korea Zinc, they utilized the 'mutual share voting rights restriction' system under the Commercial Act. In this case, the voting rights of 25.42% of Youngpoong shares within the MBK Alliance's stake are restricted, leaving only about 15.55%. This measure is interpreted as an attempt by Chairman Choi's side, which holds about 39.16%, to create a favorable situation at the temporary shareholders' meeting.

On the other hand, the MBK Alliance argues that the Commercial Act provisions on mutual share voting rights restrictions apply only to domestic corporations, so SMC does not fall under this. The MBK Alliance stated, "The Commercial Act provisions on mutual share restrictions apply only between domestic corporations, so this case does not apply," adding, "Chairman Choi Yoon-beom's attempt is the worst trick to disrupt the temporary shareholders' meeting and mock the capital market." According to the Financial Supervisory Service's electronic disclosure system, SMC is a foreign company established in Australia and is a limited company, not a stock company.

However, Korea Zinc maintains that there is no problem. A Korea Zinc official said regarding the claim that SMC is a foreign company, "There is no provision in the Commercial Act stating that overseas subsidiaries of domestic companies are exempt from Article 369, Paragraph 3 of the Commercial Act," adding, "The claim that SMC, being a foreign company, is outside the mutual share voting rights restriction regulation is not valid." Regarding the claim that SMC, as a limited company, cannot be subject to the mutual share voting rights restriction regulation, the official dismissed it, saying, "SMC is a stock company."

At the Korea Zinc extraordinary shareholders' meeting held on the 23rd at the Grand Hyatt Seoul in Yongsan-gu, Seoul, Moon Byung-guk, chairman of the Korea Zinc labor union, along with union members, are shouting slogans. Photo by Jo Yong-jun

Meanwhile, tension was palpable at the Grand Hyatt Seoul, where the temporary shareholders' meeting was held. Even the reception desk verifying identities strictly prohibited entry to outsiders. The line of shareholders waiting to register stretched about 50 meters. Even strangers quietly exchanged opinions about the possible outcome. This was due to the possibility of disruption raised after Chairman Choi's side attempted to neutralize the MBK Alliance's voting rights in Korea Zinc the day before. Kim, a minority shareholder in his 70s, said, "I had been following the news and it seems the management is taking reckless steps, like suddenly bringing up cumulative voting at the last minute," adding, "I came out because I was anxious."

At one corner of the reception, the Korea Zinc labor union, wearing headbands reading 'United Struggle,' stood holding placards throughout the registration process. They shouted slogans every ten minutes: "Protect national core technology, prevent overseas leakage. Protect Korea Zinc, a national core industry. Let's defend it." Their placards bore critical phrases against the MBK Alliance, such as 'Speculative Capital MBK' and 'Deficit Company Youngpoong.'