Young Poong won the first trial of the lawsuit for nullification of the new share issuance filed against Korea Zinc on the 27th. The court ruled that the issuance of new shares worth 500 billion won in a paid capital increase by Korea Zinc to Hyundai Motor Group's overseas subsidiary HMG Global in September 2023 is invalid.
The Seoul Central District Court's Civil Agreement Division 22 (Presiding Judge Director General Choi Wook-jin) announced that it nullifies the issuance of 1,045,430 common shares with a par value of 5,000 won issued by Korea Zinc on Sept. 13, 2023, during the first trial date for the lawsuit filed by Young Poong.
Last March, Young Poong filed a lawsuit requesting the court to nullify the issuance of 1,045,430 new shares issued by Korea Zinc in a third-party allotment paid capital increase to HMG Global, a joint venture of Hyundai Motor Group.
Earlier, Korea Zinc conducted a paid capital increase amounting to 527.2 billion won targeting HMG Global, an overseas corporation jointly established by Hyundai Motor, Kia, and Hyundai Mobis in September 2023. As a result, HMG Global secured a 5% equity stake in Korea Zinc.
Young Poong claimed that the paid capital increase was made to enhance the group's control by Chairman Choi Yun-beom of Korea Zinc. The increase raised the friendly equity stake of Chairman Choi to 32.10%, surpassing the equity stake of Young Poong, which was 31.57%.
In contrast, Korea Zinc argued that the purpose of the paid capital increase was to promote new environmentally friendly business initiatives, asserting that it followed due process.
On the same day, the court stated, "It appears that new shares were issued for operational needs for medium- to long-term growth through environmentally friendly new business initiatives, and it cannot be concluded that new shares were issued solely for strengthening management rights simply because there is a management rights dispute," but added, "It is reasonable to view 'foreign joint ventures' specified in the articles of association as foreign joint ventures based on Korea Zinc's participation." During the trial, Korea Zinc claimed that when new shares are issued to foreign investors to establish business collaborations, it should be viewed as a broad definition of 'foreign joint ventures,' but the court did not accept this.
The court also stated, "Interpreting foreign investors or counterparties without Korea Zinc's participation exceeds the limits of the wording," and concluded that Korea Zinc's issuance of new shares regarding HMG Global, in which it did not participate as a joint venture, constitutes a serious violation of the articles of association.