The Seoul Central District Court on Tuesday rejected Korea Zinc’s plan to introduce a cumulative voting system for board appointments, a move that would have allowed minority shareholders to combine their votes to elect directors.
The decision sets the stage for a pivotal extraordinary shareholder meeting on Thursday, where the Young Poong-MBK consortium plans to nominate new board members in its bid to gain control of Korea Zinc.
Young Poong and MBK currently hold approximately 41 percent of Korea Zinc’s shares, representing about 46.7 percent of voting rights. With likely support from domestic and international institutional investors, the consortium is poised to secure a majority at the meeting.
Chairman Choi’s alliance, holding 34.24 percent of shares and around 39.1 percent of voting rights, had pinned its hopes on cumulative voting to fend off the hostile takeover. The court’s decision significantly undermines those efforts.
Choi’s camp has also proposed reducing the number of board directors to 19 from 21, but implementing such a measure requires a two-thirds majority vote - an unlikely outcome without MBK’s backing.
The National Pension Service (NPS), South Korea’s largest pension fund, has announced plans to support three director nominees from each faction, while endorsing the introduction of cumulative voting. Major U.S. pension funds, including CalPERS and CalSTRS, have opposed Chairman Choi’s nominees.
Following the court ruling, Korea Zinc’s share price dropped 8.55 percent to close at 759,000 won, as investors interpreted the court ruling as a decisive moment in the months-long battle for control.
The possibility of disruption during Thursday’s meeting remains a lingering concern, as management disputes at smaller companies have seen chairpersons derail proceedings in the past. Legal experts suggest that such tactics would likely lead to prolonged litigation.
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