Court rules Korea Zinc's restriction of major shareholder's voting rights illegal

A Seoul court has declared illegal Korea Zinc's move to restrict the voting rights of its largest shareholder, Young Poong Corporation. The ruling marks a significant victory for Young Poong in its ongoing management dispute with Korea Zinc.

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SMC is not a subsidiary as defined by the Commercial Act.

The Seoul Central District Court ordered Korea Zinc CEO Park Ki-deok to pay 100 million won (approximately $72,000) in damages. The court found that Korea Zinc's actions, which involved its overseas subsidiary Sun Metal Corporation acquiring 10% of Young Poong shares to create a circular shareholding structure, were unlawful.

Korea Zinc had used this structure to limit Young Poong's voting rights at an extraordinary shareholders' meeting in January 2025. However, Young Poong and its ally MBK Partners argued that Sun Metal Corporation, being a foreign company, did not fall under the specific clause of the Commercial Act that prohibits a company from exercising voting rights for shares it holds in another company exceeding one-tenth of its total shares.

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The defendant's act of restricting voting rights based on the premise that SMC is a subsidiary is illegal.

The court agreed with Young Poong, stating that Sun Metal Corporation does not qualify as a subsidiary under the Commercial Act. Therefore, the court concluded that Korea Zinc's restriction of Young Poong's voting rights, based on the premise of Sun Metal being a subsidiary, was illegal. The court also noted that CEO Park Ki-deok was aware of the potential illegality and breach of duty of care when he proceeded with the voting rights restriction.

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Park CEO was fully aware that the restriction of voting rights for these shares could be illegal, and that Young Poong's shareholder rights could be infringed.