The maneuver hinged on a technical article of Korea's commercial law, which nullifies voting rights when a subsidiary of one company owns more than 10 percent of another company that holds a stake in the parent firm.
The restriction came after Sun Metal Corporation (SMC), a subsidiary of Korea Zinc's Australian arm Sun Metal Holdings, acquired a 10.3 percent stake in Young Poong just one day before the meeting.
“Under Article 369-3 of the Commercial Act, Young Poong’s 5,262,450 shares, representing 25.42 percent of the company, are disqualified from voting at this meeting,” Korea Zinc President Park Ki-deok declared during the gathering.
The purchase effectively established a circular shareholding structure, a controversial defensive tactic that blocked Young Poong and its private equity ally, MBK Partners, from exercising their voting power in the attempted takeover.
Korea Zinc secured overwhelming support for its management proposals. The introduction of cumulative voting passed with 76.4 percent approval, and a motion to limit the board size to 19 directors gained 73.2 percent backing. These outcomes were surprising, as a Seoul court had previously rejected the cumulative voting measure.
MBK Partners and Young Poong swiftly contested the legitimacy of the vote restriction. Their legal representatives argued that the disputed article regarding cross-shareholding apply only to domestic corporations and not to foreign entities like SMC.
“Korea Zinc’s application of Article 369-3 is not legally valid in this case,” the alliance said in a statement.
The MBK-Young Poong coalition announced plans to file for an injunction to suspend the decisions made at the shareholders’ meeting.
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