[Edaily Marketin Reporter Hur Jieun ] The Supreme Court has ruled that the measure taken by KoreaZinc(010130)at an extraordinary shareholders’ meeting in January of last year—which restricted the voting rights held by Youngpoong(000670)through its Australian subsidiary Sun Metal Corporation (SMC)—was unlawful.

According to legal circles on the 31st, the Supreme Court upheld the lower court’s ruling on the 28th that SMC, an Australian affiliate of KoreaZinc, does not qualify as a subsidiary under the Commercial Act. This decision follows the Seoul Central District Court’s partial granting of a preliminary injunction filed by Youngpoong in March of last year; after an appeal, the case was finally settled with this Supreme Court ruling.

The court found that SMC is a company with a closed structure (Pty Ltd) and cannot be considered the same or most similar to a “joint-stock company” as defined by Korean commercial law. Article 369, Paragraph 3 of the Commercial Act stipulates that provisions restricting voting rights apply only to entities that qualify as “joint-stock companies” under Korean commercial law; the court held that SMC does not meet this requirement. Consequently, the court ruled that the restriction on Youngpoong’s voting rights—which was based on the premise that SMC was a subsidiary—lacks legal grounds.

In January of last year, on the day before the extraordinary general meeting of shareholders, KoreaZinc Chairman Yoon Choi sold his 10.3% stake in Youngpoong to SMC, an Australian subsidiary. This created a circular ownership structure: “KoreaZinc → SMC → Youngpoong → KoreaZinc.” Based on this, KoreaZinc restricted 25.4% of Youngpoong’s voting rights; as a result, proposals—including one to set a cap on the number of directors and another to appoint outside directors recommended by KoreaZinc—were passed without opposition from Youngpoong.

Legal observers speculate that this Supreme Court decision could also influence the deliberations of the Fair Trade Commission (FTC). It is reported that the FTC has completed its review report on whether KoreaZinc’s use of overseas affiliates, such as SMC and SMH, to form a circular shareholding structure constitutes an act of circumvention under the Fair Trade Act, and is now awaiting a full-committee review. Although this is a separate procedure from judgments under domestic commercial law, there is speculation that the Supreme Court’s ruling may be considered as reference material during the FTC’s deliberations.

Representatives from MBK and Youngpoong stated, “This Supreme Court decision will be an important consideration in the Fair Trade Commission’s deliberations, which are examining whether the company attempted to circumvent domestic legal order and undermine shareholder rights by using overseas affiliates as a backdoor.”

Meanwhile, KoreaZinc has refuted this decision. KoreaZinc maintains that the preliminary injunction decision merely addressed the legal status of SMC under the Commercial Act at the time of the extraordinary general meeting in January 2025 and does not affect the current management system or corporate governance structure. This position is based on the fact that the current management system and corporate governance structure were established based on the regular shareholders’ meeting held in March 2025. The company explained that in a separate preliminary injunction case surrounding that regular shareholders’ meeting, KoreaZinc ultimately prevailed in the Supreme Court, and the legality and validity of the proceedings have already been recognized.

KoreaZinc also emphasized that this decision is separate from the matter currently under review by the Fair Trade Commission. The company countered that it would be an unreasonable interpretation to link this decision to whether there was a circumvention of the law under the Fair Trade Act, noting that the Supreme Court had previously ruled in another preliminary injunction case related to the annual shareholders’ meeting that the acquisition of Youngpoong shares through SMH and SMC was unlikely to constitute a violation of the Fair Trade Act.

An official from KoreaZinc stated, “This decision is merely a judgment on past legal relationships and has no bearing on the validity of the current management system or corporate governance structure.”