This article was posted on March 14, 2025, at 5:44 p.m. on the ChosunBiz MoneyMove site.
Chairman Choi Yoon-beom’s side, in conflict with Young Poong and MBK Partners over the management rights of Korea Zinc, has again created a circular investment structure among affiliates, prompting a sensitive reaction from the Fair Trade Commission. The Fair Trade Commission is already investigating whether the relationship formed by Chairman Choi's side using Sun Metal Corporation (SMC) constitutes a violation of the Fair Trade Act since last January.
According to investment banking (IB) industry sources on the 14th, Korea Zinc recently created a cross-shareholding structure between Young Poong and Korea Zinc through its Australian subsidiary Sun Metal Holdings (SMH), and the Fair Trade Commission is reportedly monitoring the situation.
An IB industry source said, "After the announcement that SMH received a cash dividend on Young Poong's shares held by Sun Metal Corporation (SMC), the Fair Trade Commission is trying to identify Chairman Choi's intentions and the grounds for such actions."
Earlier, on January 22, Korea Zinc's Australian subsidiary SMC publicly announced it had acquired 10.33% of Young Poong's equity from the Choi family and Young Poong Precision Corporation (affiliated with Chairman Choi). Young Poong already held 25.42% of Korea Zinc's equity. With SMC purchasing Young Poong shares under those conditions, the ultimate controlling company, Korea Zinc, indirectly acquired equity in Young Poong, and Chairman Choi's side immediately restricted Young Poong's voting rights regarding Korea Zinc. This was based on Article 369, Clause 3 of the Commercial Act, which restricts the exercise of voting rights against a company that holds over 10% of each other's equity.
MBK-Young Poong immediately applied for a court injunction to suspend the effectiveness of the general meeting resolution, and on the 7th, the Seoul Central District Court upheld their request. The court determined that Article 369, Clause 3 of the Commercial Act only regulates cross-investments among “joint stock companies,” so it does not apply to SMC, a limited liability company.
In response, Korea Zinc has again sought to limit Young Poong's voting rights through a circular investment structure. SMC has distributed 10.3% of Young Poong's equity as a cash dividend to SMH. The existing circular investment structure of "Korea Zinc→SMH→SMC→Young Poong→Korea Zinc" has changed to "Korea Zinc→SMH→Young Poong→Korea Zinc." As a result, a new cross-shareholding relationship has been established, and Chairman Choi's side claims that Young Poong's voting rights are still limited.
The cross-shareholding relationship created by Chairman Choi's side is already under investigation by the Fair Trade Commission. MBK-Young Poong reported a complaint alleging Chairman Choi's violation of the Fair Trade Act, and as a result, the Fair Trade Commission notified on the 11th, a month later, of the initiation of examination procedures related to Korea Zinc's illegal actions.
The Fair Trade Act states, "If a party acquires or owns shares of an affiliate company that holds its own shares using another's name for its own calculation, imprisonment or fines may be imposed." MBK-Young Poong claims that "(Chairman Choi's side) acquired Young Poong shares held by SMC in the name of SMC, thereby acquiring them in Korea Zinc's calculation, which constitutes an illegal act."
Legal experts are saying that the recent artificial creation of a circular investment structure while Chairman Choi's side is already under investigation by the Fair Trade Commission was "reckless behavior."
A lawyer from a large law firm said, "It is generally reasonable to repeat such (suspected illegal) actions only after a conclusion that they are not illegal. The Fair Trade Commission may interpret this as Korea Zinc not respecting its judgment, which could be displeasing."
A Fair Trade Commission official remarked, "(The formation of another cross-shareholding structure through SMH) is a matter that requires further review," adding, "We are in the process of receiving opinion documents from both parties on the reported content and will investigate based on the facts after reviewing financial statements and other materials."