Supreme Court Rules Korea Zinc’s Young Poong Voting Ban Unlawful

The Supreme Court has declared Korea Zinc's restriction of voting rights held by its largest shareholder, Young Poong, to be unlawful. This decision overturns the legal basis Korea Zinc used to employ an overseas affiliate, Sun Metals Corp., to limit Young Poong's voting rights. The court's ruling is significant as it challenges the company's corporate governance strategy.

The court also found that Sun Metals Corp. does not meet the criteria of a "subsidiary" under South Korea's Commercial Act, undermining the key legal justification for the voting restriction. This ruling stems from an extraordinary shareholders meeting in January 2025 where Korea Zinc restricted Young Poong's voting rights due to a cross-shareholding structure involving Sun Metals.

The decision not only impacts Korea Zinc's governance but also the Fair Trade Commission's ongoing investigation into the company's use of overseas affiliates, which may violate the Fair Trade Act. Young Poong and MBK Partners, the company's major shareholders, have called for an independent audit committee member at an upcoming extraordinary shareholders' meeting on September 9, citing the court's ruling as evidence of the need for better oversight.

The board and audit committee have been criticized for their lack of oversight in key decisions, including the restriction of voting rights and the use of overseas affiliates. Korea Zinc is currently facing regulatory scrutiny from multiple authorities, including sanctions by the Securities and Futures Commission, a tax investigation, and a review by the Fair Trade Commission.

Shareholders are concerned that the company's governance structure could increase legal and financial risks if left unchanged.