Korea Zinc ownership battle enters new phase as court recommends settlement over first shareholder vote

A court has issued a conciliation recommendation in the lawsuit over whether to void the extraordinary general meeting that marked the first direct shareholder vote between the Youngpoong-MBK Partners alliance and Korea Zinc Chairman Choi Yun-beom's camp — a clash that arose from the management dispute that began in September 2024.

The Seoul Central District Court's Civil Division 22, presided over by Judge Park Jeong-ho, issued the conciliation recommendation on Thursday in a shareholder meeting resolution cancellation suit that the Youngpoong-MBK alliance filed against Korea Zinc in February last year. The decision concerned the first general meeting held after the two sides entered their management dispute. The Youngpoong-MBK alliance is understood to have been the first to ask the court to issue the recommendation.

A conciliation recommendation is a mechanism by which a court, rather than issuing a judgment, urges both parties to make concessions and resolve the case as equitably as possible. If neither side files an objection within two weeks of receiving the decision, it carries the same legal effect as a court-approved settlement, which itself has the same force as a final judgment.

Youngpoong and MBK Partners signed a management cooperation agreement in September 2024 and launched their bid to wrest control of Korea Zinc from Choi. Both sides fought over shareholding, and the Youngpoong-MBK alliance, holding the larger stake, sought to secure a board majority at a general meeting and take over management.

Just before the extraordinary general meeting, Choi's camp sold a 10.3 percent stake in Youngpoong — held by Youngpoong Precision, now KZ Precision, and members of Choi's family — to Sun Metal Corporation (SMC), a subsidiary controlled by Sun Metal Holdings (SMH), an Australian unit wholly owned by Korea Zinc. This created a circular shareholding chain running Korea Zinc–SMH–SMC–Youngpoong.

At the extraordinary general meeting in January last year, Korea Zinc CEO Park Ki-deok, serving as chairman of the meeting, invoked the Commercial Act's restrictions on voting rights of cross-held shares to block Youngpoong from exercising voting rights on its 25.4 percent stake in Korea Zinc. Choi's camp retained a board majority and preserved management control, and a motion to introduce a cumulative voting system passed.

The Youngpoong-MBK alliance responded in February of that year by filing a suit to cancel the meeting's resolutions and a motion for an injunction to suspend their effect, arguing that blocking Youngpoong's voting rights was unlawful. The alliance also filed a complaint with the Korea Fair Trade Commission, alleging that Choi and others had violated the Monopoly Regulation and Fair Trade Act.

The court hearing the injunction motion issued a partial acceptance ruling in March of that year, suspending the effect of all resolutions except the one introducing the cumulative voting system. Choi's camp then constructed a new circular shareholding structure running Korea Zinc–SMH–Youngpoong.

At the annual general meeting held in March of that year, Choi's camp again used the new circular shareholding structure as grounds to restrict Youngpoong's voting rights. The Youngpoong-MBK alliance filed another suit seeking to cancel the resolutions from that meeting. That case is being heard by Civil Division 29 of the Seoul Central District Court.

The Youngpoong-MBK alliance also filed a damages suit against Park, alleging he had improperly restricted Youngpoong's voting rights during the extraordinary general meeting. Civil Division 17 of the Seoul Central District Court, presided over by Judge Jang Ji-hye, issued a partial ruling in favor of the plaintiffs on July 10, ordering Park to pay Youngpoong and MBK 100 million won ($69,800) in damages plus delay charges.

Korea Zinc held its annual general meeting in March this year. Choi's camp again retained a board majority and held on to management control. However, a motion to appoint at least two separately elected audit committee members was put to a vote but defeated by opposition from Youngpoong and MBK. Korea Zinc is scheduled to hold an extraordinary general meeting in September.