Korea Zinc rebuffs Youngpoong, MBK over Supreme Court ruling, says management unaffected

Korea Zinc rebuffed Youngpoong and MBK Partners on Monday, saying the two shareholders were distorting the significance of a recent Supreme Court ruling related to an extraordinary shareholder meeting held in January last year. The company said the decision concerned only the legal classification of Sun Metal Corporation (SMC) at that meeting and has no bearing on the current management structure and governance built on a subsequent annual general meeting.

Korea Zinc issued a statement Monday saying the Supreme Court's injunction ruling related to the January last year extraordinary shareholder meeting "is a matter that does not affect the validity of Korea Zinc's current management structure and governance."

The central issue in the case was whether SMC, an Australian subsidiary, could be regarded as equivalent or most similar to a stock company under Korean commercial law at the time of the January 2025 extraordinary meeting. The Supreme Court found no legal error in the lower court's ruling that SMC could not be classified as such a foreign company. Korea Zinc said the decision was a legal prerequisite for determining whether Youngpoong had been entitled to exercise voting rights at that meeting.

Korea Zinc said the current governance structure was established not on the basis of that extraordinary meeting but on the March 2025 annual general meeting held two months later.

In a separate injunction case concerning the March annual meeting, Korea Zinc won a final ruling in its favor at the Supreme Court. On that basis, the company said the legality and validity of the annual meeting had already been affirmed by the judiciary, and therefore the latest ruling targeting the January extraordinary meeting does not affect the current board composition or management structure.

Korea Zinc also drew a line against attempts to link the Supreme Court ruling to a matter under review by the Korea Fair Trade Commission.

The company said the injunction case directly addressed only the commercial-law classification of SMC, and that whether the acquisition of Youngpoong shares through overseas subsidiaries constituted an illegal circumvention under the Fair Trade Act was not a subject of that ruling. Korea Zinc also cited a separate injunction case related to the March annual meeting, in which a court found it difficult to conclude that SMH and SMC's acquisition of Youngpoong shares violated the Fair Trade Act.

"Despite these facts, forcibly linking the court's finding — that SMC cannot be regarded as equivalent or most similar to a stock company under Korean commercial law — to the question of whether a violation of the Fair Trade Act occurred is nothing more than a far-fetched argument by MBK and Youngpoong to bolster their hostile takeover logic," Korea Zinc said.

The legal battle between the two sides is intensifying again ahead of Korea Zinc's extraordinary shareholder meeting on Sept. 9, at which Korea Zinc and the Youngpoong-MBK camp are set to face off in a vote over the appointment of audit committee members, among other agenda items.

Korea Zinc also noted that domestic and international proxy advisory firms have been issuing successive recommendations against the audit committee candidates put forward by Youngpoong and MBK, saying this undermines the governance-improvement rationale the two have advanced throughout the management control dispute.

The company also raised questions about the track record of its opponents, citing controversies over the financial structures and internal controls at companies in which MBK has invested, as well as environmental and safety issues at Youngpoong's Seokpo smelter.

Korea Zinc said it plans to "correct the factual distortions and overreach by MBK and Youngpoong, while focusing its efforts on actively communicating with the market and shareholders to pursue pressing management issues and future business strategies without disruption, and on enhancing corporate and shareholder value."