It was learned on the 10th that the Korea Fair Trade Commission has begun sanction procedures against Korea Zinc. Korea Zinc is suspected of mobilizing overseas affiliates to create a new circular shareholding link during a management control dispute with its parent company, Young Poong.
According to industry sources, the Korea Fair Trade Commission (FTC) recently sent an examination report to Korea Zinc. The examination report is a document that contains alleged violations and sanction opinions identified by the Korea Fair Trade Commission (FTC) while investigating the corporations. It is similar to a prosecution's indictment.
The Korea Fair Trade Commission (FTC) launched its investigation into Korea Zinc following a report by private equity fund MBK Partners, which sided with Young Poong. The case began last year when shares amounting to 10.3% equity in Young Poong held by Chair Choi's side were transferred to the grandson company Sun Metal Corporation (SMC). At the time, the market interpreted the move as Chair Choi's side giving up equity to strip Young Poong of its voting rights over Korea Zinc.
At that time, Young Poong held 25.42% equity in Korea Zinc, and when the two companies each hold more than 10% of the other's equity, they cannot exercise voting rights over the other company under the Commercial Act. In other words, by securing at least 10% of Young Poong's equity through SMC, Korea Zinc caused Young Poong to lose its voting rights in Korea Zinc.
The problem is that the corporate governance structure changed from "Young Poong→Korea Zinc→Sun Metal Holdings→SMC" to a circular shareholding structure of "Young Poong→Korea Zinc→Sun Metal Holdings→SMC→Young Poong." Article 22 of the Monopoly Regulation and Fair Trade Act prohibits affiliate investment that forms circular shareholdings in cross-shareholding-restricted corporate groups like Young Poong. Korea Zinc has argued that SMC is an overseas affiliate and thus not subject to the Fair Trade Act. However, the Korea Fair Trade Commission (FTC) has decided to sanction this conduct, judging that circular shareholding through overseas affiliates is also unlawful.
An official at the Korea Fair Trade Commission (FTC) said, "We cannot confirm individual matters."