KEMCO to Hold Extraordinary General Meeting on the 9th in Vote Battle Over One Audit Committee Seat Under the “3% Rule”

[Financial News] A vote battle between KEMCO Chairman Choi Yun-beom’s side and the Youngpoong Corporation–MBK Partners alliance over control of KEMCO is about to begin. The two sides will face off at an extraordinary general meeting on the 9th over the election of four independent directors and one independent director who will also serve as an audit committee member. In particular, institutional investors and minority shareholders are expected to play a key role in the election of the audit committee member, where the voting rights of major shareholders are capped at a combined 3%.
According to industry sources on the 4th, one of the key agenda items at KEMCO’s extraordinary general meeting is the separate election of an audit committee member under the amended Commercial Act. KEMCO has nominated Baek In-gyu, a former partner at Deloitte Anjin with Korean and U.S. certified public accountant qualifications, while Youngpoong Corporation and MBK Partners have nominated Park Yoo-kyung, a former executive at Dutch pension fund APG.
For the election of an audit committee member, the voting rights of the largest shareholder and specially related parties are capped at a combined 3%. As a result, differences in shareholdings between major shareholders have less impact than in the election of ordinary directors, while institutional investors and minority shareholders wield relatively greater influence.
The major proxy advisers’ recommendations disclosed so far favor Baek. According to KEMCO, eight domestic and international advisers, including Institutional Shareholder Services (ISS), Glass Lewis, Sustinvest, and the Korea Institute of Corporate Governance and Sustainability (KCGS), have recommended voting for Baek. They cited his expertise in accounting, auditing, and internal controls as key reasons. KCGS, however, supports Park, citing the need for independent monitoring and checks on management.
The two sides are also continuing their legal battle ahead of the meeting. On the 28th of last month, the Supreme Court of Korea upheld the lower court’s ruling that it was unlawful to restrict Youngpoong Corporation’s voting rights during the extraordinary general meeting in January 2025 based on its Australian affiliate, Sun Metals Corporation (SMC).
Youngpoong Corporation and MBK Partners are citing the ruling to argue that an independent audit committee member must be elected. KEMCO, meanwhile, countered that the Supreme Court of Korea’s decision was limited to whether SMC qualified as a subsidiary under the Commercial Act at the time and whether the resulting restriction on Youngpoong Corporation’s voting rights was lawful. It said the ruling did not address the validity of the current management structure or board of directors.
The dispute over criminal proceedings is also intensifying. KEMCO said the previous day that explanatory materials from Youngpoong Corporation and MBK Partners for the extraordinary general meeting contained inaccurate information about the disposal of treasury shares, the issuance of new shares, follow-up measures after accounting sanctions, and the process surrounding the resignation of independent directors. It added that it plans to file criminal complaints against those involved on charges including defamation and obstruction of business.
Amid the continuing control dispute, KEMCO’s performance has improved. In the second quarter of this year, consolidated revenue reached 6.3726 trillion won and operating profit totaled 587.1 billion won, up 66.6% and 126.8%, respectively, from a year earlier. Operating profit for the first half stood at 1.3332 trillion won, the highest ever for a first-half period.
The industry is also paying close attention to the expansion of KEMCO’s strategic-minerals business, including germanium and indium. KEMCO is pursuing production of germanium intermediates using facilities operated by its subsidiary Kemco, with sales targeted for early 2027.
In the United States, KEMCO is pursuing Project Crucible, an integrated smelter in Tennessee with a total investment of approximately $7.4 billion. Last year, it signed a memorandum of understanding with Lockheed Martin for germanium supply and procurement, as well as cooperation on critical-mineral supply chains.
An industry official predicted, "As the dispute over control of KEMCO continues, shareholders at this extraordinary general meeting will decide on the audit committee’s independence and expertise, as well as the current management’s performance and mid- to long-term business strategy."
[email protected] Kim Mi-hee Reporter