Korea Zinc Wins Appeal in Suit to Invalidate 520 Billion Won Share Issue; Lower Court Ruling Overturned

"Issued within the scope necessary to achieve business objectives"

Korea Zinc

An appellate court has ruled that the new shares worth more than 520 billion won that Korea Zinc issued to HMG Global, an overseas affiliate of Hyundai Motor Group, cannot be deemed invalid. The decision overturns a lower court ruling that had invalidated the issuance.

The Seoul High Court’s Civil Division 18-3, comprising Presiding Judge Jin Hyun-min and Judges Wang Jeong-ok and Park Seon-jun, on November 13 overturned the lower court’s ruling in an appeal filed by Young Poong against Korea Zinc over the validity of the new share issuance and dismissed the claim brought by the successor to the original plaintiff. It also dismissed as inadmissible an application to join the lawsuit as a co-litigant, filed for the first time on appeal.

The court found that the issuance could not be deemed invalid, as it had been carried out within the scope necessary to achieve the company’s business objectives.

Young Poong initially filed the lawsuit, after which YPC took over the plaintiff’s position. YPC is a newly established company to which Young Poong contributed in kind the 25.42% stake in Korea Zinc it held, following a board resolution in March 2025.

Following a board resolution in August 2023, Korea Zinc issued 1,045,430 common shares to HMG Global through a third-party allotment in September. The issue price was 504,333 won per share, for a total of approximately 527.2 billion won. HMG Global, established through joint investment by Hyundai Motor, Kia and Hyundai Mobis, thereby secured an approximately 5% stake in Korea Zinc. The two companies subsequently pursued cooperation in areas including electric vehicle battery materials.

Korea Zinc’s articles of incorporation allow it to allot new shares to a third party rather than existing shareholders when issuing shares to a “foreign joint venture” as required for business purposes. Young Poong argued that the issuance was solely intended to defend management control and that HMG Global did not qualify as a “foreign joint venture,” and filed suit in March 2024.

In June 2025, the lower court ruled that the issuance was invalid, finding that a “foreign joint venture” should be interpreted as a foreign corporation established with Korea Zinc participating as an investor. However, it rejected Young Poong’s argument that the issuance was solely intended to defend management control, finding that it was required for new environmentally friendly businesses.

On appeal, Korea Zinc argued that the term “foreign joint venture” also includes foreign corporations with which it has an ongoing economic relationship. It added that even if the term were interpreted differently, the issue did not involve a defect serious enough to invalidate it. Young Poong countered that the articles of incorporation should be interpreted strictly, as a third-party allotment is an exception to existing shareholders’ preemptive rights. It also argued that, as of September 2023, when the new shares were issued, the combined stake held by Korea Zinc’s management and friendly shareholders had risen to 32.03%, surpassing Young Poong’s stake of 31.57%.

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