Young Poong and MBK Express Regret Over Losing 1st Trial in Shareholder Derivative Suit Against Korea Zinc, Plan Immediate Appeal

Young Poong and MBK Partners expressed regret on October 22 over losing the first trial in a shareholder derivative lawsuit filed against Korea Zinc's board of directors regarding the company's tender offer for treasury shares, stating that they will immediately appeal.

The 30th Civil Division of the Seoul Central District Court delivered its ruling in the first trial of the damages suit filed by Young Poong against 10 Korea Zinc directors, including Chairman Choi Yun-beom.

Young Poong had previously filed the lawsuit, claiming that Korea Zinc inflicted damages worth approximately 673.2 billion won on the company by conducting a treasury share tender offer at 890,000 won per share—higher than the stock price at the time—amid a management control dispute.

The court ruled in favor of Korea Zinc, stating, "If the decision was based on legal advice, a review of injunction applications, and capital raising methods through a certain percentage premium, and that judgment was not remarkably unreasonable, it cannot be evaluated as a violation of the duty of care as a good manager or the duty of loyalty."

In a statement, Young Poong and MBK argued, "While the court broadly recognized the managerial discretion and procedural judgment of Korea Zinc's board of directors, it did not sufficiently consider the impact that the treasury share tender offer had on the company's financial structure and shareholder value."

They pointed out that Korea Zinc borrowed more than 1.6 trillion won for a treasury share tender offer worth approximately 2 trillion won, turning its financial structure from a net cash state into a net debt state.

They also criticized, "Purchasing treasury shares at 890,000 won per share caused damages exceeding 830 billion won to the company, and the 2 trillion won general public offering of paid-in capital pursued afterward was also an attempt to shift the borrowing burden incurred during the tender offer onto shareholders."

Young Poong and MBK stated, "The discretionary power of directors' business judgment can receive legal protection only when it is faithfully exercised for the interests of the company and all shareholders," adding, "We will verify the illegality of the treasury share tender offer and the board's violation of the duty of care in the upper court."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.