Funds from Deficit-Running Grandchild Company Used for Personal Purposes
"Korea Zinc Harmed... Board Must Launch Immediate Investigation"
Choi Yoon-beom, chairman of Korea Zinc, and Yeongpung and MBK Partners, the largest shareholders of Korea Zinc who are engaged in a management rights dispute, demanded that the Korea Zinc board of directors immediately investigate whether the acquisition of Yeongpung shares by Korea Zinc’s subsidiary the day before last month’s extraordinary general meeting of shareholders was illegal.
On the 18th, Yeongpung and MBK Partners announced that they sent a certified letter with this content to all members of the Korea Zinc board. They viewed the acquisition of 10.33% of Yeongpung shares owned by Chairman Choi’s family for 57.5 billion won by Korea Zinc’s subsidiary Sun Metal Corporations (SMC) on the 22nd of last month, the day before the extraordinary general meeting, which triggered the mutual share voting rights restriction system, as an illegal act.
Yeongpung and MBK pointed out that the private use of SMC’s assets worth 57.5 billion won, a company 100% controlled by Korea Zinc, for the benefit of a specific shareholder, Chairman Choi Yoon-beom, constitutes a breach of trust that harms Korea Zinc.
In fact, as of the end of last year, most of SMC’s cash holdings were not accumulated from operating profits but were formed through Korea Zinc’s payment guarantees. Additionally, SMC had turned to a deficit. They argued that purchasing Yeongpung shares unrelated to its core business under such circumstances was a decision that caused damage to the company.
They also criticized that this act actively reflected Chairman Choi’s intentions. It was claimed that, as CEO of Korea Zinc, he exerted influence over affiliates. They emphasized that Park Ki-duk, CEO of Korea Zinc, is also a director of SMC, which supports this claim. This means that the assets of the subsidiary were used for personal purposes of defending management rights by Chairman Choi and CEO Park, both registered directors of Korea Zinc, resulting in a conflict of interest between specific shareholders and the company. They pointed out that this act, involving Korea Zinc executives, infringed on the rights of all shareholders except those aligned with Chairman Choi and violated the fiduciary duty of directors to act in the company’s best interests.
A representative of Yeongpung and MBK stated, “The Korea Zinc board must clearly reveal the circumstances under which SMC purchased Yeongpung shares and how Chairman Choi Yoon-beom and CEO Park Ki-duk were involved in the process and hold them accountable,” adding, “It is also necessary to take measures at next month’s regular general meeting to prevent CEO Park from again restricting the voting rights of Korea Zinc shares held by Yeongpung.”
Kim Kwang-il, Vice Chairman of MBK Partners (right), is answering questions from the press at a press conference regarding MBK Partners' public tender offer for Korea Zinc held at Lotte Hotel in Jung-gu, Seoul, on the morning of the 19th of last month. On the left is Kang Sung-doo, President of Youngpoong. Photo by Yonhap News.
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