Youngpoong, a major shareholder in Korea Zinc, filed a lawsuit against the latter over the issuance of new shares, following a vote battle at the regular shareholders‘ meeting regarding dividends and articles of incorporation changes.

Korea Zinc said on Wednesday that Youngpoong filed a lawsuit with the Seoul Central District Court on March 6th, 2024, to invalidate its issuance of new shares to HMG Global, a Hyundai Motor Group’s overseas subsidiary. Although the dividend proposal was passed as originally presented by Korea Zinc’s board of directors at the shareholders‘ meeting held on Tuesday, the articles of incorporation amendment, which required a special resolution, was dismissed due to Youngpoong’s opposition.

The lawsuit targets the capital increase that Korea Zinc carried out for Hyundai Motor Group in 2023. At the time, HMG Global, jointly invested by Hyundai Motor, Kia, and Hyundai Mobis, injected some 527 billion won ($400 million) to acquire around 1.04 million shares of Korea Zinc, representing about 5 percent of the total shares of Korea Zinc as of the end of 2023.

HMG Global is viewed as having friendly ties with Korea Zinc’s top management, including chairman Choi Yoon-beom who has been feuding with Youngpoong for management control.

Youngpoong questions the legality of the capital increase, claiming that the company arbitrarily expanded the application of the articles of incorporation provisions that allow third-party share issuance solely to foreign joint ventures to secure friendly shares. Korea Zinc’s articles of incorporation specify one of the conditions for issuing new shares to third parties as when the company issues new shares to foreign joint ventures for management purposes.

“The term ‘foreign joint venture’ as specified in the articles of incorporation refers to joint ventures formed by Korea Zinc as a party to the joint investment agreement, and HMG Global does not fall under this category,” a Youngpoong official said, adding “HMG Global is practically a Korean company with no substantial difference from other domestic companies.”

Korea Zinc responded by saying that “all procedures were conducted legally, and Youngpoong also supported the recent proposal to appoint an HMG Global executive as Korea Zinc’s non-executive director.”

Industry insiders view Youngpoong‘s lawsuit as stemming from a power struggle after Korea Zinc expanded its friendly shares by conducting third-party capital increases with Hyundai Motor Group as well as exchanging its treasury shares with Hanwha and LG.

Youngpoong opposed the amendment to the articles of incorporation presented by Korea Zinc’s board of directors at the shareholders‘ meeting to curb Korea Zinc’s expansion of friendly forces. The amendment’s key point was to allow Korean corporations to participate in increases alongside foreign joint ventures.

By Cho Yun-hee and Minu Kim

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]