Youngpoong, MBK drop Korea Zinc EGM lawsuit, citing goals achieved

Youngpoong and MBK Partners have decided to withdraw the lawsuit they filed seeking to nullify resolutions passed at Korea Zinc's extraordinary general meeting in January last year. The two parties concluded that the litigation's core objectives had largely been met, including the resignation of unlawfully appointed outside directors and the expected shareholder value gains from a planned stock split.

The two parties announced Tuesday they would drop the suit in accordance with a court-recommended settlement issued by the Seoul Central District Court. Under Korean civil procedure, such a recommendation carries the same legal force as a court-mediated settlement if neither party raises an objection.

The lawsuit stemmed from Korea Zinc's decision last year to have an overseas affiliate, SMC, acquire a stake in Youngpoong and then use the resulting cross-shareholding arrangement to strip Youngpoong — the largest shareholder — of its voting rights before pressing ahead with the extraordinary general meeting. The court ruled at the time that restricting the voting rights of then-CEO Park Ki-deok was unlawful and issued an injunction suspending the outside directors from exercising their duties.

Youngpoong and MBK said the practical reason to contest the outside directors' appointments had disappeared after all four directors whose duties had been suspended under the injunction recently resigned, creating an opportunity to restore proper board governance.

The two parties also decided not to challenge the procedural validity of the stock-split and articles-of-incorporation amendment approved at the meeting, concluding that carrying out the split would better serve shareholders' interests. They said the move would improve accessibility and liquidity for Korea Zinc shares — which trade above 1 million won ($699) per share — easing price volatility and enhancing shareholder value.

The decision to drop the procedural challenge while embracing the market-friendly stock split and securing the outside directors' exit is widely seen as a calculated move to claim both the moral high ground and practical gains, while reinforcing Youngpoong and MBK's shareholder-friendly credentials.

"The withdrawal reflects a comprehensive assessment of the benefits of the outside directors' resignations and the stock split," a Youngpoong-MBK spokesperson said. "However, we will continue to pursue civil, criminal and fair-trade liability against Chairman Choi Yun-beom and CEO Park Ki-deok to the very end for unlawfully restricting the largest shareholder's voting rights through an illegal cross-shareholding scheme engineered via overseas affiliates."