Youngpoong Corporation loses first-instance ruling in KRW 837 billion shareholder derivative suit over Korea Zinc; plans to appeal

[Financial News] Youngpoong Corporation has lost a shareholder derivative suit seeking approximately KRW 837 billion in connection with Korea Zinc’s 2024 tender offer for its own shares, which it brought against directors including Korea Zinc Chairman Choi Yun-beom. The court viewed the board’s decision at the time to make a tender offer for treasury shares as a reasonable business judgment and did not find the directors liable for damages. Youngpoong Corporation and MBK Partners immediately announced plans to appeal, meaning the legal battle between the two sides will continue.
According to legal and industry sources on the 22nd, the Seoul Central District Court’s 30th Civil Division, presided over by Judge Kim Seok-beom, dismissed all claims that day in a shareholder derivative suit brought by Youngpoong Corporation against 10 Korea Zinc directors, including Chairman Choi.
The suit arose from a tender offer for treasury shares pursued during the 2024 control dispute at Korea Zinc. In September 2024, Youngpoong Corporation and MBK launched a tender offer for Korea Zinc shares at KRW 660,000 per share, raising the offer price to KRW 750,000 and then KRW 830,000. On October 2 of that year, Korea Zinc’s board decided to make a tender offer for treasury shares at KRW 830,000 per share, and on October 11 raised the offer price to KRW 890,000.
Youngpoong Corporation argued that buying Korea Zinc shares for KRW 890,000 each, when the share price had been KRW 556,000 just before the control dispute, was a decision made to preserve management’s positions and had caused losses to the company. In November of that year, it filed suit, alleging that the directors had breached their duty of care and duty of loyalty.
However, the court found that the board’s decision, made after reviewing external legal advice, the court’s injunction ruling and funding plans, was not manifestly unreasonable. It also found that using a discretionary reserve for a specified purpose to acquire treasury shares did not violate the law or the company’s articles of incorporation.
Youngpoong Corporation and MBK said immediately after the ruling that they would appeal. They argued, “Illegal management conduct that turned Korea Zinc into an individual’s private piggy bank to preserve that person’s position and saddled it with massive debt cannot be justified as ‘directors’ discretion.’”
Youngpoong Corporation and MBK argued that Korea Zinc undermined its financial soundness and shareholder value by borrowing more than KRW 1.6 trillion to fund the tender offer for treasury shares. They also contend that its subsequent plan to raise at least KRW 2 trillion through a public offering of new shares was an attempt to shift the burden of its debt onto ordinary shareholders. The two sides said they would again contest in the appeal whether the directors had breached their duty of care.
Korea Zinc, by contrast, said the ruling recognized the board’s business decision at the time as reasonable. It argued that Youngpoong Corporation and MBK were stifling normal business activities by bringing large lawsuits against individual directors, even over a tender offer for treasury shares that proceeded after the court’s injunction ruling.
Korea Zinc said, “MBK and Youngpoong must stop abusing litigation to obstruct our normal business activities and undermine our corporate value in pursuit of a hostile M&A.” It also stressed that the company should not spend its resources on a control dispute and legal battles while pursuing key projects, including strengthening critical-mineral supply chains and building a smelter in the United States.

[email protected] Kim Mi-hee Reporter