[Edaily Marketin Reporter Hur Jieun ] A court has ruled that the restriction of voting rights imposed on Youngpoong(000670), the largest shareholder of KoreaZinc(010130), at the company’s extraordinary general meeting of shareholders last January constituted an unlawful act. Park Ki-deok, CEO of KoreaZinc, who served as chairman of the general meeting at the time, was ordered to pay 100 million won in damages.

According to legal and investment banking (IB) industry sources on the 13th, the 17th Civil Division of the Seoul Central District Court (Presiding Judge Jang Ji-hye) ruled in favor of the plaintiff on the 10th in a damages lawsuit filed by Youngpoong against CEO Park, ordering him to pay 100 million won in damages plus interest for late payment.

The court ruled that KoreaZinc’s actions—which involved forming a cross-shareholding relationship through its Australian affiliate, Sun Metal Corporation (SMC), at an extraordinary general meeting held in January of last year, and subsequently restricting Youngpoong’s voting rights—constituted an unlawful act. The court reasoned that SMC, an Australian company with a closed structure, cannot be regarded as the same type of corporation as a Korean joint-stock company under domestic commercial law; consequently, it does not qualify as a subsidiary under the Commercial Act, and therefore, restricting Youngpoong’s voting rights based on this premise constitutes an unlawful act without legal basis.

Furthermore, the court viewed CEO Park’s decision to proceed with the restriction of voting rights—despite his awareness, as CEO of KoreaZinc and a director of SMC, of the potential infringement of shareholder rights—as an intentional tort. According to the judgment, CEO Park reportedly stated that the restriction of voting rights was “part of a strategy to defend management control.”

The court determined that if Youngpoong’s voting rights had been recognized, it was highly likely that proposals such as the one setting a cap on the number of directors and the appointment of outside directors recommended by KoreaZinc would not have been passed. The fact that KoreaZinc did not accept Youngpoong’s requests to postpone the general meeting and conduct a legal review was also cited as grounds for the finding of illegality.

Regarding this ruling, MBK Partners and Youngpoong stated, “This ruling confirms that artificially restricting the largest shareholder’s voting rights on the grounds of the existing management’s defense of management control is not permissible, and that legal liability follows for the management that led this effort.”