Korea Zinc to Appeal 'Invalid New Share Issuance' Ruling... "Shares Issued for Business Necessity"

Court Recognizes Need for New Share Issuance for Eco-Friendly Business
Korea Zinc to Clarify Articles on "Foreign Joint Ventures"

Korea Zinc has announced its intention to appeal the court's decision regarding the lawsuit over the invalidation of its new share issuance. In the appeals court, Korea Zinc plans to clarify the purpose and significance of the articles of incorporation related to foreign joint ventures, aiming to have the legitimacy of the new share issuance recognized.

The court dismissed the provisional injunction filed by Youngpoong and MBK Partners against Korea Zinc, requesting permission to exercise voting rights at the shareholders' meeting. On the 28th, company officials are proposing to enter the Korea Zinc shareholders' meeting scheduled to be held at the Mondrian Hotel in Yongsan-gu, Seoul. This shareholders' meeting is expected to have a high possibility of disruption. 2025.03.28 Photo by Yoon Dongjoo

According to the legal community on the 27th, the Seoul Central District Court Civil Division 22 (Presiding Judge Choi Wookjin) ruled in favor of Youngpoong in the lawsuit filed against Korea Zinc over the invalidation of the new share issuance. This first-instance verdict comes one year and three months after Youngpoong filed the lawsuit in March of last year.

The first-instance court stated that the new shares issued by Korea Zinc appeared to be necessary for business management, aiming for mid- to long-term growth through eco-friendly new businesses. The court also acknowledged the management necessity, explaining that the mere existence of a management rights dispute does not mean that the new shares were issued solely to strengthen management control.

However, regarding the section on "foreign joint ventures" in Korea Zinc's articles of incorporation, the court found that it was reasonable to interpret this as referring to foreign joint ventures premised on Korea Zinc's participation. For this technical reason, the court determined that the issuance did not comply with the articles of incorporation.

In response, Korea Zinc stated that in the appeals trial, it will provide a more detailed explanation of the purpose and significance of the relevant articles concerning foreign joint ventures, and seek to have the legitimacy of the issuance recognized.

Previously, in September 2023, Korea Zinc conducted a paid-in capital increase worth 527 billion won, issuing 1,045,430 new common shares with a par value of 5,000 won each to HMG Global, an overseas corporation jointly established by Hyundai Motor, Kia, and Hyundai Mobis. As a result, HMG Global secured a 5% stake in Korea Zinc, which is considered a friendly stake for Korea Zinc.

The court ruled that "the issuance of new shares to HMG Global constituted a serious violation of the articles of incorporation and infringed upon the existing shareholders' preemptive rights," and declared, "The issuance of 1,045,430 new common shares at 5,000 won each on September 13, 2023, is invalid."