Korea Zinc refuted the claim by Young Poong and MBK Partners that the measure to restrict Young Poong's voting rights at the extraordinary shareholders meeting in Jan. last year was illegal, saying it "distorts and overinterprets the intent of the Supreme Court's decision."
According to legal sources on the 31st, on the 28th the Supreme Court upheld the lower court's finding that Korea Zinc's Australian affiliate Sun Metal Corporation (SMC) does not fall under a "subsidiary" as defined in Article 369, Paragraph 3 of the Commercial Act. The reasoning is that it is difficult to view SMC as the same type as, or most similar to, a joint-stock company under Korea's Commercial Act.
Earlier, Korea Zinc bought more than 10% equity in Young Poong through SMC just before the extraordinary shareholders meeting in Jan. 2025. Korea Zinc then restricted the voting rights attached to Young Poong's Korea Zinc shares, arguing that a "cross-shareholding" relationship had been created as both sides held each other's equity. The court found that the cross-shareholding rules could not be applied given SMC's corporate form.
Young Poong and MBK argued that the decision confirms that Korea Zinc's voting-rights restriction at the time was illegal. They said, "Korea Zinc inside director Choi Yoon-beom formed a circular cross-shareholding using an overseas affiliate as a lever to defend management control, and based on that restricted the voting rights of the largest shareholder, Young Poong. The Supreme Court has rendered a clear judicial determination that this was illegal."
Korea Zinc countered that the decision was limited to the extraordinary shareholders meeting in Jan. 2025. Korea Zinc said, "The Supreme Court's injunction decision related to the extraordinary shareholders meeting in Jan. last year does not affect the validity of Korea Zinc's current management system and governance," adding, "Korea Zinc's current management system and governance were established based on the regular shareholders meeting held in Mar. 2025."
Korea Zinc cited the fact that a separate court decision was rendered in the voting-rights dispute surrounding the March regular shareholders meeting. At that time, after Sun Metal Holdings (SMH), the parent company, received the Young Poong equity held by SMC, Young Poong's voting rights were again restricted. Young Poong and MBK filed for an injunction to allow the exercise of voting rights, but it was not granted, and the Supreme Court dismissed the re-appeal in Apr. this year.
The two sides also clashed over the impact of the decision on the Korea Fair Trade Commission's review. Young Poong and MBK argued, "This Supreme Court decision will be an important consideration in the FTC's deliberation on whether an overseas affiliate was used as a bypass to undermine the domestic legal order and shareholder rights."
Korea Zinc countered that the Supreme Court decision and whether there was an evasive act under the Fair Trade Act now under FTC review are separate issues. Korea Zinc said, "Forcibly linking the court's injunction-related finding—that SMC cannot be seen as the same type as, or most similar to, a joint-stock company under Korea's Commercial Act—to whether there was an evasive act under the Fair Trade Act is nothing but an unfounded claim by MBK and Young Poong to bolster a hostile M&A narrative."