On the 23rd, Korea Zinc's extraordinary general meeting ended with the victory of Chairman Choi Yun-beom's side due to the restriction of voting rights by the largest shareholder Young Poong. MBK Partners, the private equity fund manager allied with Young Poong, announced that it would file criminal complaints against Chairman Choi, Korea Zinc's CEO Park Gi-deok, and the Choi family to the prosecutors and the Fair Trade Commission, alleging that they committed illegal acts related to the Fair Trade Act and engaged in embezzlement against its Australian subsidiary.
MBK Partners held a press conference via video link on the morning of the 24th to explain its future plans.
Kim Kwang-il, Vice Chairman of MBK Partners, said sharply, "It seems that Chairman Choi, after being in despair, has decided to become an offender by crossing the line that should not be crossed."
The day before the extraordinary general meeting, on the 22nd, Korea Zinc's 100% subsidiary Sunmetal Corporation (SMC) abruptly announced that it had acquired a 10.33% stake in Young Poong from the Choi family and Young Poong Precision Corporation. Since Young Poong already holds a 25.42% stake in Korea Zinc, when Korea Zinc also acquired shares of Young Poong, Chairman Choi's side stipulated that Young Poong could not exercise voting rights over Korea Zinc. This is because Article 369, paragraph 3 of the Commercial Act restricts any corporation from exercising voting rights over the opposing company if both companies hold more than 10% of each other's shares.
Vice Chairman Kim claimed that this act is illegal according to Article 36 of the Fair Trade Act. Article 36 of the Fair Trade Act stipulates that "no one shall engage in acts intended to avoid the provisions of paragraphs 2 to 5 of Article 18 and Articles 19 to 25."
According to Article 42 of the Enforcement Decree of the Fair Trade Act, the types of 'illegal acts' include 'acquiring or owning the shares of an affiliated company in which one owns its own shares through the name of another person for one's own account.'
Vice Chairman Kim argued that here, 'self' refers to Korea Zinc, 'affiliated company' refers to Young Poong, and 'others' refer to SMC, meaning that 'the shares of Young Poong held by Korea Zinc were acquired using the name of SMC for Korea Zinc's account.'
Vice Chairman Kim stated, "This act was done by Korea Zinc, and SMC lent its name," adding, "When the corporation Korea Zinc and SMC acted, there must have been decision-makers, and those decision-makers were Chairman Choi Yun-beom and CEO Park Gi-deok."
Chairman Choi and CEO Park are executives of Korea Zinc and former/current executives of SMC. Chairman Choi stepped down from the SMC board in mid-month, while CEO Park remains with SMC.
Consequently, MBK plans to report both Chairman Choi and CEO Park for violations of the Fair Trade Act, and they also intend to file criminal complaints against the Choi family, who participated as 'accomplices.' The Choi family sold Young Poong shares to SMC this time.
According to Article 124 of the Fair Trade Act, violations of Article 36 can result in imprisonment or fines. Article 129, paragraph 3 states, 'The Attorney General may notify the Fair Trade Commission and request a prosecution.'
MBK also stated that it would file a complaint against Chairman Choi and others on suspicion of embezzlement. They assert that SMC, which is operating in Australia, had no business reason to acquire Young Poong shares, yet unnecessarily spent 57.5 billion won to buy the equity to defend the management rights of the largest shareholder, thereby causing damage to the subsidiary.
Vice Chairman Kim said, "We will discuss with local law firms whether we can file a complaint against SMC in Australia and respond accordingly."
Meanwhile, MBK plans to counteract by immediately applying for a provisional injunction to suspend the resolution of the general meeting. A provisional injunction to suspend the resolution is sought in cases where a resolution has been made at a general meeting but there are defects in the method, content, or procedure of summoning. They intend to nullify not only the proposal for the introduction of cumulative voting approved at that day's meeting but also the appointments of directors from Chairman Choi's side.
If the provisional injunction is granted, the regular general meeting in March can elect directors using simple voting rather than cumulative voting. In this case, the MBK-Young Poong side, which holds 46.7% of the voting rights, will have an advantage.