Court Rules Korea Zinc's Restriction of Young Poong's Voting Rights at Extraordinary Shareholders' Meeting Was Unlawful...CEO Park Gideok Held Liable for Damages

Young Poong Partially Wins Lawsuit
Korea Zinc CEO Ordered to Pay 100 Million Won in Damages

Korea Zinc has been subject to a court ruling that it unfairly restricted the voting rights of its largest shareholder, Young Poong, at last year's extraordinary general meeting.

On July 13, the Seoul Central District Court's Civil Division 17 (Presiding Judge Jang Ji-hye) ruled partially in favor of Young Poong and MBK Partners in their damages lawsuit against Korea Zinc CEO Park Gideok, ordering Park to pay 100 million won in damages plus delayed interest.

The court found that Korea Zinc formed a circular shareholding structure by transferring Young Poong shares to its overseas affiliate, Sun Metal Corporation (SMC), and used this structure to restrict Young Poong's voting rights at the extraordinary general meeting in January 2025. The court ruled this action unlawful.

According to Article 369, Paragraph 3 of the Commercial Act, if Company A holds 10% or more of Company B's shares directly or through subsidiaries, Company B loses its voting rights for any shares it holds in Company A.

Korea Zinc used this provision to limit Young Poong's voting rights. However, Young Poong and MBK Partners, who have been in a management dispute with Korea Zinc, argued that SMC is a foreign company, not a corporation as defined by the Commercial Act, and thus the provision does not apply. The court accepted Young Poong's argument, stating, "SMC cannot be regarded as a corporation similar to those defined by the Commercial Act, nor does it qualify as a subsidiary under the Act."

Specifically, the court cited SMC's restrictive governance structure as grounds for its decision, noting that SMC's articles of association limit the transfer of shares and cap the number of shareholders at 50. The court stated, "The defendant's (Korea Zinc's) act of restricting voting rights at the extraordinary general meeting on the basis that SMC is a subsidiary was unlawful."

The court further found that CEO Park unfairly restricted Young Poong's voting rights to defend his existing management control. "CEO Park was fully aware that restricting the voting rights of these shares could be unlawful and that this could infringe on Young Poong's shareholder rights," the court stated, "yet he still imposed these restrictions, in clear breach of the duty of care required of a chairperson at the extraordinary general meeting."

The court added that it set the compensation amount at 100 million won, taking into account the scale and value of the shares with restricted voting rights. Young Poong stated, "This ruling is not simply about the 100 million won in damages. It clearly confirms that restricting the voting rights of a major shareholder for the purpose of defending the incumbent management's control cannot be tolerated and that executives who orchestrate such unlawful acts will be held legally accountable."

This content was produced with the assistance of AI translation services.