Current Status of the Management Control Dispute Litigation Involving Korea Zinc

(Tender Offer Price: KRW 660,000 per share; Period: September 13 – October 4)

(1)st Filing: Provisional injunction filed to prohibit Korea Zinc, as the debtor, from acquiring its own shares
(Case No. 2024Kahap21412, Seoul Central District Court)

First submission: October 30

Second submission: November 8

Third submission: November 20

* Moreover, Young Poong has maliciously leaked to the media certain information obtained from materials that Korea Zinc had submitted voluntarily and in good faith, using such information as a basis to defame Korea Zinc. This conduct demonstrates that the application for provisional injunction to access and copy accounting books was not made for the legitimate purpose of exercising shareholder oversight over management, but rather for the improper purpose of exerting pressure on Korea Zinc by spreading unfounded suspicions as part of a hostile M&A attempt.

(3)rd Filing: Re-filing of application for provisional injunction prohibiting Korea Zinc from acquiring its own shares
(Case No. 2024Kahap21412, Seoul Central District Court)

* The majority of the grounds asserted in the application to suspend the tender offer procedure merely repeat arguments already raised and explicitly rejected in the prior injunction case. Consequently, this application constitutes a direct challenge to the court’s prior ruling permitting Korea Zinc’s tender offer and is aimed at disrupting the capital market by creating a false appearance that there are legal issues with Korea Zinc’s self-tender offer authorized by the prior decision. This constitutes an abuse of the injunction process with malicious intent to obstruct Korea Zinc’s tender offer and, in doing so, facilitate the success of Young Poong’s earlier tender offer.

* Since the injunction was filed for the purpose of suppressing Korea Zinc’s share price, it constitutes fraudulent unfair trading and price manipulation under applicable securities laws.

Furthermore, false statements were made against Chairman Choi Yoon-beom.

Such conduct constitutes fraudulent unfair trading under applicable securities laws, involving the use of deceptive means, plans, or artifices in connection with the trading of financial investment products.

* Despite acknowledging that Korea Zinc’s share price would naturally decline if the injunction were granted, MBK purchased 20,000 shares of Korea Zinc on the open market on October 18, 2024—the day of the hearing—contrary to the public predictions they had made about the injunction’s outcome. Such conduct constitutes fraudulent unfair trading under the Capital Markets Act.

It appears that Bookook Securities had previously short sold Korea Zinc shares and made substantial purchases just prior to the tender offer closing date in order to cover the borrowed shares, following a large-scale recall request from NH Investment & Securities.

* Such conduct by MBK constitutes fraudulent unfair trading and price manipulation aimed at artificially inducing a stock price increase.

* Notice of convocation and public announcement of the shareholders’ meeting were completed on December 24, well in advance of the statutory two-week prior notice requirement.

The reasons for this decision were as follows:
(i) Korea Zinc’s tender offer for treasury shares did not violate the Capital Markets Act, the Commercial Act, or the company’s Articles of Incorporation, and the court dismissed Young Poong’s injunction petitions, ruling that there was no breach of these laws or the Articles of Incorporation;
(ii) Based on a reasonable determination that Young Poong’s tender offer posed a high risk of damaging Korea Zinc’s medium- to long-term corporate value, the company’s decision to conduct a tender offer for treasury shares was a rational measure taken to protect the interests of the company and its general shareholders, thereby recognizing the managerial necessity; and
(iii) The fact that the tender offer price was somewhat higher than the prevailing market price at the time did not alone raise concerns regarding the fairness of the transaction terms (in fact, Young Poong itself had acquired Korea Zinc shares at a significantly higher price of KRW 1,940,000 than the tender offer price).

* Nevertheless, Young Poong has unreasonably filed a lawsuit seeking damages against the directors of Korea Zinc with the intent to undermine their business judgment and to intimidate or deter future decision-making.

* Young Poong’s letter dated November 5 reached Korea Zinc on November 6, and Korea Zinc responded with a reply letter dated November 7, which was received by Young Poong on November 8. Despite this, Young Poong unreasonably filed an application for a provisional injunction to inspect and copy the shareholder register on November 8. The failure to provide the shareholder register was due to the omission of the power of attorney by Sejong, Young Poong’s agent. Korea Zinc promptly provided the shareholder register upon verification of the power of attorney, and subsequently, Young Poong withdrew the injunction application on November 21

(Seoul Central District Court Case No. 2024KaHap21890)

* Since the board resolution on October 2, 2024, regarding the tender offer for treasury shares, Korea Zinc has consistently declared its intention to cancel all treasury shares acquired through the tender offer. During the hearing, the court also questioned MBK whether there was any objective basis to suspect that Korea Zinc might dispose of treasury shares by means other than cancellation. In response, fearing the dismissal of its injunction request, MBK withdrew the injunction application on December 26, 2024.

* Since declaring its tender offer on September 13, Young Poong has abused the litigation process by filing a total of eight injunction applications (and one main lawsuit). It cannot be ruled out that Yeongpung’s injunction filings are not due to unavoidable circumstances caused by Korea Zinc’s alleged non-cooperation or the likelihood thereof, but rather stem from improper motives aimed at maliciously exploiting the media and public opinion.

(Seoul Central District Court Case No. 2024KaHap21996)

* However, even if a listed company’s articles of incorporation exclude cumulative voting, shareholders have a lawful right under the Commercial Act to propose an amendment to the articles to introduce cumulative voting. Furthermore, MBK — which has emphasized corporate governance improvements and effectively declared a warning to domestic companies — acting strongly against governance reform measures is self-contradictory.

* Young Poong and MBK are abusing the injunction process solely with the aim of seizing control of Korea Zinc’s board at the extraordinary general meeting.

* On October 29, Young Poong issued another letter asserting that if the Korea Zinc board were to approve the disposal of treasury shares to the employee stock ownership association, the directors who support such a resolution could be held criminally liable for breach of fiduciary duty and face substantial civil damages. However, Korea Zinc and its board had never considered such a disposal. This letter was thus a baseless, threatening communication directed at the directors based on mere speculation.

* The causes of action underlying the claim include: 1) The investment in One Asia Partners, 2) The investment in Ignio Holdings, and 3) The contract with C.S. Design Group.

* The defendants have submitted only formal responses, and no other litigation developments have occurred.

* [Agenda Item No. 2: Election of seven directors by cumulative voting based on a maximum number of 19 directors.
Agenda Item No. 3: Election of directors by cumulative voting without any limit on the maximum number of directors.

* [Court’s Ruling] The court has determined that a request for cumulative voting conditioned upon the amendment of the articles of incorporation to exclude cumulative voting (so-called “conditional cumulative voting request”) is not legally valid.

* Approval was obtained for the amendment of the Articles of Incorporation to introduce the cumulative voting system.

* In accordance with the injunction prohibiting the submission of certain agenda items, the proposal for the election of directors by cumulative voting was not presented.

* The Company’s incumbent management-side directors were re-elected, thereby successfully maintaining and defending control of the Company

(Seoul Central District Court Case No. 2025KaHap20144)

(Case No. 2025KaHap20155, Seoul Central District Court)

* Request for injunction to suspend the execution of duties by the newly appointed directors at the extraordinary shareholders’ meeting.

 (12th) provisional injunction to suspend the effectiveness of the shareholders’ meeting and the (13th) provisional injunction to suspend the execution of duties are consolidated and proceeding together.

(Seoul Central District Court 2025Kagi50241)

* On March 12, the court granted the applicant’s request.

* On March 19, the opposing party filed an immediate appeal (Appellate Case: Seoul Central District Court 2025Ra205).

* On April 8, 2025, the appeal was dismissed, and as the opposing party did not pursue a further appeal, the case was concluded.

(Korea Zinc prevailed in the case)

* [Court] The right of minority shareholders to request the convocation of a general meeting exists solely to guarantee them the opportunity to have their proposed agenda items discussed; it does not extend to ensuring that resolutions are adopted in accordance with the minority shareholders’ wishes. If the company convenes a general meeting with the agenda items requested by the shareholders who made the request, the court will consider the benefit or necessity of granting permission to convene the meeting to have lapsed, and will therefore dismiss the application.

(Seoul Central District Court 2025Kahap20194)

* Agenda Item 1 – In order to appoint a temporary chair, a no-confidence motion against the current chair must be proposed, but there are no legitimate grounds for such a motion.

Agenda Item 4 – The company plans to discuss and resolve specific matters, such as the timing of the cancellation of treasury shares.

Partial Grant of Provisional Injunction to Suspend Performance of Duties

* As to the other agenda items, since it is difficult to find that Korea Zinc has fulfilled its burden of proof regarding the status of SMC as a corporation under the Commercial Act, the restriction on Young poong’s voting rights is deemed unlawful. Accordingly, Young poong’s provisional injunction is granted, and the effectiveness of the shareholders’ meeting resolutions on the other agenda items is suspended.

* Based on the above, the provisional injunction seeking suspension of the execution of duties by the newly appointed directors elected by the above shareholders’ meeting resolutions is granted.

* On April 1: Korea Zinc filed an immediate appeal (Appellate Case No. 2025Ra2350, Seoul High Court)

* Appeal proceedings are currently ongoing

* On March 7, 2025, Young Poong contributed all of its shares in Korea Zinc as payment in kind to establish YPC, and subsequently, on March 12, 2025, acquired 10 shares of Korea Zinc.

 The court held that the existence of a cross-shareholding should be determined based on the status as of the time of the voting rights exercise, and that SMH qualifies as a “stock company” under the Korean Commercial Act.

(Seoul High Court Case No. 2025Ra2309)

Appeal trial ongoing