Young Poong, which is in conflict with Chairman Choi Yun-beom over control of Korea Zinc, reported to the prosecution that it has filed a complaint against Chairman Choi and both current and former directors of Sun Metal Corporation (SMC), a subsidiary of Korea Zinc in Australia.
Young Poong-MBK issued a press release on the 3rd stating, "Chairman Choi committed unprecedented illegal acts, creating an unlawful investment structure in order to preserve his position, which severely undermined shareholder rights and the order of the capital markets," and added, "We have reported Chairman Choi Yun-beom, Park Gi-deok, President of Korea Zinc, Lee Seong-chae, head of SMC, and Choi Joo-won, Chief Financial Officer (CFO) of SMC, to the Southern District Prosecutors' Office on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes (breach of trust) and the Fair Trade Act."
Earlier, on the 22nd of last month, SMC unexpectedly announced that it had acquired a 10.33% stake in Young Poong just a day before an extraordinary general meeting of shareholders of Korea Zinc. Since Young Poong already held a 25.42% stake in Korea Zinc and Korea Zinc also acquired a stake in Young Poong, Chairman Choi's side prevented Young Poong from exercising its voting rights over Korea Zinc. Article 369, Paragraph 3 of the Commercial Act restricts companies from exercising voting rights over a counterpart if they hold more than 10% of each other's shares.
With Young Poong's voting rights blocked, this shareholders' meeting ended in a landslide victory for Chairman Choi's side. Young Poong-MBK has reported Chairman Choi's side to the Fair Trade Commission for violations of the Fair Trade Act.
Young Poong-MBK emphasized, "This is the first case of a corporate group deliberately creating the appearance of restrictions on voting rights under the Commercial Act by utilizing 100% overseas subsidiaries while simultaneously evading regulations such as mutual investment restrictions, and it is an act of evading the legislative intent of the Fair Trade Act."
The reason Young Poong-MBK added breach of trust charges in its complaint to the prosecution is that it judged SMC's public funds were mobilized solely to achieve Chairman Choi's personal interests in maintaining his dominance.
According to the Supreme Court case law, if a subsidiary purchases shares of another company at the request or direction of the holding company's chairman for personal benefit without a clear operational necessity, the crime of breach of duty may be established.
Young Poong-MBK claimed, "From SMC's standpoint, the purchase of Young Poong shares resulted only in a massive cash outflow of over half of the average annual capital expenditure (57.5 billion won) without any business gains, while Chairman Choi illegally mobilized overseas subsidiaries to privately use those public funds, seeking to maintain substantial benefits in controlling Korea Zinc.
A representative from Young Poong-MBK said, "Chairman Choi and his accomplices harm the interests of shareholders and general investors for the benefit of one individual, utilize Korea Zinc's funds like a private safe, and do not hesitate to engage in any illegal acts," adding that, "Given the seriousness of the crime and the concern over evidence destruction, the prosecution's prompt and strict investigation should ensure the rule of law is emphasized in both the capital markets and our society."