On the 31st, the Korea Corporate Governance Forum (hereafter referred to as Governance Forum) evaluated the extraordinary shareholders' meeting of Korea Zinc held on the 23rd, saying it "diminished the national prestige of South Korea" and "trampled on the hope for the 'entry of the Korean stock market into advanced markets.'"
On that day, the Governance Forum issued a statement noting, "Capital markets develop on the basis of trust, and transparency and predictability are essential conditions. There are concerns that, due to this incident, South Korea may be treated as a frontier market level country, no longer as an emerging market, in the international financial market."
A day prior to the extraordinary shareholders' meeting of Korea Zinc, on the 22nd, Korea Zinc's wholly-owned subsidiary, Sun Metal Corporation (SMC), suddenly announced that it had acquired 10.33% of Young Poong's equity from the Choi family and Young Poong Precision Corporation. As Young Poong already held 25.42% of Korea Zinc's equity and Korea Zinc also acquired equity from Young Poong, Chairman Choi Yun-beom's side stated that Young Poong could not exercise voting rights over Korea Zinc. This is because Commercial Act (Article 369, Paragraph 3) restricts firms from exercising voting rights over each other if they hold more than 10% of each other's equities. With Young Poong's voting rights blocked, the shareholders' meeting ended in a landslide victory for Chairman Choi's side.
MBK Partners-Young Poong, the largest shareholder of Korea Zinc, immediately objected. MBK Vice Chairman Kim Kwang-il held a press conference on the 24th and stated that Chairman Choi's side had committed illegal acts regarding Article 36 of the Fair Trade Act and that they would file a complaint against Chairman Choi, President Park Ki-deok of Korea Zinc, and the Choi family with the Fair Trade Commission and the prosecution.
The Governance Forum claimed, "The Fair Trade Commission and financial authorities must thoroughly investigate this incident," noting, "Recently, large companies like LG, Doosan, and Hyundai Motor have pushed ahead with local listings of overseas corporations that infringe on the interests of parent company shareholders. Therefore, there is a high possibility that numerous business groups under the restriction of mutual investment are abusing foreign subsidiaries for mutual investment to unfairly expand the dominance of family owners."
Furthermore, the Governance Forum asserted that "this case demonstrates the limitations of the Fair Trade Commission in dealing with governance issues, which has primarily focused on regulations regarding large corporations," adding that "the fact that SMC, a subsidiary of Korea Zinc, was able to acquire 10% of Young Poong's equity was also due to the extreme undervaluation of the top company (PBR 0.2 times) and the chronic issue of dual listings on the Korean stock market."
He added, "The act of robbing shareholders of their voting rights undermines the existence of the corporation, mobilizing the corporation's legal personality for the personal profit of specific shareholders, and timing the equity transaction just before the shareholders' meeting to neutralize shareholders' right to apply for provisional measures all seriously infringe upon shareholder interests."