MBK Partners and Youngpoong filed a court injunction to ban Chairman Choi Yun-beom's proposal to appoint directors through a cumulative voting system. This is amid competition with Chairman Choi's side over the management rights of Korea Zinc.
MBK Partners and Youngpoong announced on the 30th that they have filed a request for an injunction with the Seoul Central District Court to prohibit the presentation of the second and third proposals for appointing directors by cumulative voting at the extraordinary shareholders' meeting scheduled for the 23rd of next month.
Earlier, on the 23rd, Korea Zinc confirmed the agenda for the extraordinary shareholders' meeting and revised its announcement on calling the meeting. The subsidiary of Chairman Choi, Yumi Development, presented an amendment to the articles of incorporation to introduce cumulative voting as the first proposal. Korea Zinc currently excludes cumulative voting by its articles of incorporation, similar to most other corporations, and aims to change this to allow cumulative voting. Cumulative voting is a method where shareholders can allocate one vote per share they hold for as many candidates as they wish to elect. In cases with multiple candidates, the voting rights can be concentrated on one or distributed among several candidates. If directors are elected through a simple voting method, all directors are elected according to the will of the majority shareholder; however, using a cumulative voting method prevents all directors from being elected based on the major shareholder's preferences, allowing minority shareholders to concentrate their voting rights to elect directors they recommend.
The proposal contested by MBK Partners and Youngpoong is the director appointment proposal based on the passage of the first proposal. A representative from MBK Partners noted, "Chairman Choi's side is trying to immediately elect the board of directors through cumulative voting at the extraordinary shareholders' meeting conditional on the introduction of cumulative voting" and added, "There are concerns raised in both the capital market and the legal community regarding this." He further stated, "With little time left before the extraordinary shareholders' meeting, we applied for an injunction to prevent the proposal for directors' appointment through cumulative voting from being presented."
MBK Partners claims that Chairman Choi's proposal for the appointment of directors through cumulative voting violates the Commercial Act. Article 382-2, Paragraph 1, and Article 542-7, Paragraph 2 of the Commercial Act states, "Unless otherwise provided in the articles of incorporation, a request may be made to appoint directors through cumulative voting."
A representative from MBK Partners said, "Chairman Choi's request for cumulative voting directly contradicts the wording of the Commercial Act, which explicitly states that at the time of requesting cumulative voting, there should be no provisions in the articles of incorporation excluding cumulative voting." This means that Yumi Development's request for cumulative voting on the 10th should have been valid according to Korea Zinc's articles of incorporation, but since it was not allowed, it is deemed unlawful.
MBK Partners explained, "After reviewing the cumulative voting-related disclosures posted on the Financial Supervisory Service's electronic disclosure site over the past 10 years, we found no instances where a directors' appointment proposal was made conditional on the amendment of articles of incorporation to introduce cumulative voting."
Additionally, MBK Partners argued that presenting the proposal for directors' appointment through cumulative voting violates MBK Partners and Youngpoong's right to convene the extraordinary shareholders' meeting. It stated that while MBK Partners and Youngpoong intended to present a simple voting method for appointing directors, the proposal submitted by Chairman Choi's side based on cumulative voting altered the original purpose and significance of the meeting. The core argument is that this act infringes on MBK Partners and Youngpoong's claim as the largest shareholders.
The claim that the directors' appointment proposal through cumulative voting violates the principle of shareholder equality is also a reason for MBK Partners' injunction request. A representative from MBK Partners commented, "If minority shareholders had known that the cumulative voting proposal would be presented, they would likely have attempted to elect their preferred candidates to the board. However, Chairman Choi's side made this proposal right before the deadline for shareholder proposals, and this information was not accessible to general shareholders."
Legal community representatives stated, "If cumulative voting is adopted in this extraordinary shareholders' meeting, only Yumi Development and Chairman Choi's side will monopolize the benefits of the cumulative voting request, while MBK Partners and other shareholders who were unaware of the cumulative voting are deprived of the opportunity to exercise their rights to recommend candidates and vote."