Korea Zinc CEO Park Ki-deok speaks during the firm's extraordinary shareholders' meeting at Grand Hyatt Seoul, Thursday. Joint Press Corps

Korea Zinc Chairman Choi Yun-beom, who has been engaged in a monthslong battle over management control against the alliance of Young Poong and private equity firm MBK Partners, secured a victory at an extraordinary shareholders' meeting, Thursday. They passed an agenda in his favor, including the introduction of a cumulative voting system.

However, the MBK alliance, the largest shareholder of Korea Zinc, accused Choi of resorting to the "worst tactics and illegal maneuvers" by proceeding without recognizing Young Poong's 25 percent stake in the zinc smelting firm. MBK hinted at filing a lawsuit to nullify measures passed at the shareholders' meeting.

The meeting, convened at the request of the MBK alliance, was originally anticipated to favor the alliance, as MBK and Young Poong hold a dominant position with a combined 46.7 percent of voting rights.

Although Choi's side attempted to overturn the unfavorable situation by proposing a cumulative voting system, a court blocked this move, Tuesday, ruling in favor of the alliance, which sought to prohibit the appointment of directors via the system.

In response, Choi unveiled yet another strategic move just one day after the court's ruling. Young Poong Precision, controlled by Choi, sold 10.33 percent of Young Poong shares, held by the company and the Choi family, to Sun Metal Corporation (SMC), an Australian subsidiary of Korea Zinc.

This action is interpreted as an attempt to neutralize Young Poong's voting rights by establishing a circular shareholding structure.

According to the Commercial Act, when cross-held shares among affiliates exceed 10 percent, those shares lose their voting rights.

At the beginning of the extraordinary shareholders' meeting, Korea Zinc CEO Park Ki-deok, who chaired the meeting, stated, "We will conduct the meeting in accordance with the newly applied voting rights regulations. We will not recognize Young Poong's 25 percent stake in Korea Zinc."

As a result, the proposal to introduce the cumulative voting system, which Choi had pushed for, was passed.

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

While this system is typically regarded as a measure to protect minority shareholders' interests and enhance corporate transparency, Choi's proposal has been interpreted as a move to block the MBK alliance's recommended candidates from joining the board.

However, as the court prohibited the use of the cumulative voting system at Thursday's meeting, its actual implementation is expected to take place at an upcoming regular shareholders' meeting in March.

The extraordinary shareholders' meeting of Korea Zinc takes place at Grand Hyatt Seoul, Thursday. Joint Press Corps

Korea Zinc also passed an amendment to its articles of incorporation to limit the number of directors to a maximum of 19.

This proposal required a special resolution, needing approval from at least two-thirds of shareholders. So, it was initially expected to be rejected as the MBK alliance opposed it. But by restricting the voting rights of Young Poong's shares, the zinc smelter was able to secure the necessary votes to approve the amendment.

MBK claimed that the provisions of the Commercial Act regarding cross-shareholding apply only to domestic corporations structured as stock companies, whereas SMC is a foreign corporation and a limited liability company.

"Choi's use of SMC to defend his control over Korea Zinc violates the law and constitutes a manipulative and unlawful circular shareholding scheme, aimed solely at obstructing the today's meeting," an MBK official said.

At the meeting venue, a representative from MBK and Young Poong stated, "We will seek clear accountability in court," signaling their intent to pursue legal action.