Korea Zinc Chairman Choi Yun-beom speaks during a press conference at the Korea Chamber of Commerce and Industry in central Seoul, Nov. 13. Korea Times file

A Seoul court ruled in favor of the alliance of private equity firm MBK Partners and Young Poong, Tuesday, concluding that Korea Zinc's directors cannot be appointed through a cumulative voting system at the firm's extraordinary shareholders' meeting scheduled for Thursday.

The MBK alliance has been engaged in a monthslong battle over management control with Korea Zinc Chairman Choi Yun-beom.

In December, the alliance filed an injunction, which sought to prohibit the appointment of directors via a cumulative voting system, a measure proposed by the board of directors at the zinc smelter to defend the chairman.

With the ruling issued by the Seoul Central District Court, the MBK alliance gained the upper hand in the ownership fight, making it likely that Choi's side will struggle to maintain a majority on the board.

The cumulative voting system allows shareholders to allocate their voting rights, which are equal to the number of director candidates, to a single candidate.

As this system can potentially consolidate votes in favor of a preferred candidate and increase the likelihood of blocking the entry of directors preferred by MBK, its introduction has been interpreted as a system favorable to Choi.

The shareholding ratio of the MBK alliance is 40.97 percent — 46.7 percent in voting rights. On the other hand, Choi and his allies hold only 34.24 percent — 39.16 percent in voting rights — making it difficult to dominate the board. For this reason, Choi has been making efforts to introduce the cumulative voting system.

In response, the MBK alliance has been putting all its efforts into blocking Choi's attempt to introduce the system, criticizing it as a move that would only be exploited to extend the chairman's hold on his position.

With the court's decision, the world's largest zinc smelter must elect directors through a regular voting system rather than the cumulative voting system. It is expected that MBK's control over the board will become significantly easier, given the alliance's voting rights are close to a majority.

“MBK Partners and Young Poong respect the court's decision and view this outcome as a natural and lawful conclusion,” an MBK official said.

“This pivotal court decision signifies a turning point for governance reform at Korea Zinc. The upcoming extraordinary shareholders' meeting is expected to serve as the foundation for meaningful changes to Korea Zinc's governance structure, including a comprehensive board restructuring and the introduction of an executive officer system.”