Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
MBK to file criminal complaint against Korea Zinc chairman
Kim Kwang-il, a partner at MBK Partners, speaks during an online press conference, Friday. Screenshot from Zoom
By Jun Ji-hye
Private equity firm challenges validity of all resolutions made at shareholders’ meeting
The alliance of private equity firm MBK Partners and Young Poong said on Friday that it will take legal action against Korea Zinc Chairman Choi Yun-beom and other management officials for proceeding with their extraordinary shareholders’ meeting the previous day without recognizing Young Poong’s 25 percent stake.
Kim Kwang-il, an MBK partner overseeing the Korea Zinc takeover bid, announced plans to file complaints with the Korea Fair Trade Commission and the prosecution against Choi as well as Korea Zinc CEO Park Ki-deok and others involved in forming the new circular shareholding structure aimed at neutralizing Young Poong’s voting rights.
“In Korea, forming new circular shareholding structures is prohibited by law and subject to criminal penalties,” he said during an online press conference. “In particular, creating a circular shareholding structure through overseas entities constitutes an unlawful act.”
Kim also stated plans to file for an injunction to suspend the validity of the resolutions passed at the shareholders’ meeting, including the introduction of the cumulative voting system, which Choi had pushed for to block the MBK alliance’s recommended candidates from joining the board.
The comments came as Choi, who has been engaged in a monthslong battle over managerial control against the MBK alliance, defended his management rights by successfully blocking the alliance’s attempt to take control of the board of directors, through a vote at the extraordinary shareholders’ meeting.
The victory was possible as Young Poong Precision, controlled by Choi, sold 10.33 percent of Young Poong shares, held by the company and the Choi family, to Sun Metal Corporation (SMC), an Australian subsidiary of Korea Zinc.
By establishing a new circular shareholding structure, this action neutralized Young Poong’s voting rights, according to the Commercial Act. The law stipulates that when cross-held shares among affiliates exceed 10 percent, those shares lose their voting rights.
By leveraging this circular shareholding structure, Korea Zinc overturned what was initially an unfavorable situation due to its lower shareholding ratio.
The MBK-Young Poong alliance holds 40.97 percent of Korea Zinc’s shares, compared to 34.35 percent held by Choi and his allies. However, the circular shareholding structure implemented by the zinc smelter restricted voting rights for Young Poong’s 25.42 percent stake, reducing the alliance’s effective shareholding down to 15.55 percent and resulting in their defeat in the vote.
An extraordinary shareholders’ meeting of Korea Zinc takes place at Grand Hyatt Seoul, Thursday. Joint Press Corps
Kim argued that SMC’s acquisition of a 10.33 percent stake in Young Poong just a day before the shareholders’ meeting was a clear violation of the Fair Trade Act.
He also claimed that the move constituted a breach of trust, stating, “Choi used criminal actions to protect his own management rights, which will lead to fines or penalties for Korea Zinc. He knowingly caused potential damage.”
Additionally, Kim noted that SMC spent 57.5 billion won ($40 million) to acquire non-voting shares of Young Poong solely to protect Choi’s personal management rights. He claimed this caused financial harm to SMC, and since losses incurred by a subsidiary ultimately impact Korea Zinc, the act constitutes a breach of fiduciary duty.
He further claimed that this invalidates all resolutions passed at Thursday’s meeting, where Young Poong’s voting rights were excluded.
“We will challenge the validity of the meeting’s decisions through an injunction. Everything we were prevented from doing as a majority shareholder at the meeting is subject to this injunction,” Kim said.
If the injunction is granted before the regular shareholders’ meeting in March, Young Poong’s voting rights will be reinstated.
Kim said, “If we don’t succeed with the complaints and injunctions, it will be difficult to participate in Korea Zinc’s board of directors. However, regardless of the time it takes, we will find a way to join Korea Zinc’s board and correct the wrongdoings.”
Korea Zinc CEO Park Ki-deok speaks during a press conference at Grand Hyatt Seoul, Friday. Yonhap
For its part, Korea Zinc's management proposed a major compromise through mutual communication to the MBK alliance later on Friday.
"It is time to stop the wasteful conflict fueled by fabricated claims and slander," CEO Park stated at a press conference.
He suggested that Korea Zinc could operate its board more transparently and, through mutual communication, open it up to MBK in a more proactive manner.
"If MBK desires, we are also open to allowing management participation. I believe that MBK’s expertise and wisdom, gained as the largest private equity firm in Northeast Asia, will be beneficial to Korea Zinc," he said.
In response, an MBK official said, "We believe Korea Zinc's proposal lacks sincerity. If they truly want a conversation, they should first nullify the illegal shareholders' meeting and the unlawful circular shareholding that took place Thursday."