Seoul High Court overturns first ruling, dismisses Youngpoong's claim

Korea Zinc issued 527.2 billion won in new shares to Hyundai Motor Group

Court finds issuance served legitimate business purpose

Korea Zinc calls on rival camp to stop 'relentless legal battles'

An aerial view of Korea Zinc's Onsan smelter [Korea Zinc]
An aerial view of Korea Zinc's Onsan smelter [Korea Zinc]

Korea Zinc has prevailed in an appeals court over a legal challenge to its 527.2 billion won ($396 million) share issuance to Hyundai Motor Group, with Seoul High Court overturning a lower court ruling that had sided with rival shareholder Youngpoong.

Korea Zinc said Friday it welcomed the Seoul High Court's appellate ruling dismissing the lawsuit seeking to void the new share issuance.

The court's Civil Division 18-3, presided over by Judges Jin Hyeon-min, Wang Jeong-uk and Park Seon-jun, overturned the first-instance ruling that had found in favor of Youngpoong and dismissed the claim entirely.

The panel found that the share issuance fell within the scope necessary to achieve the company's business objectives and was permissible under its articles of incorporation, and therefore could not be deemed void.

The dispute stems from a third-party allotment Korea Zinc carried out in August 2023 as part of a strategic business partnership with Hyundai Motor Group.

Hyundai Motor Group acquired approximately 5 percent of Korea Zinc through HMG Global, a US entity jointly established by Hyundai Motor, Kia and Hyundai Mobis. In September of that year, HMG Global was allotted 1,045,430 common shares at a total investment of approximately 527.2 billion won.

The two companies agreed to cooperate across the secondary battery materials supply chain — including the joint procurement, processing and supply of nickel, a key material for electric vehicle batteries — as well as spent battery recycling.

Youngpoong filed a lawsuit in March 2024, arguing that allocating new shares to HMG Global rather than existing shareholders was a measure to entrench Korea Zinc's management and did not meet the share issuance requirements set out in the articles of incorporation.

In June last year, the first-instance court sided with Youngpoong. While acknowledging the business rationale for cooperating with Hyundai Motor Group, the court found that HMG Global did not qualify as a "foreign joint venture" as defined in Korea Zinc's articles of incorporation, and voided the issuance on the grounds that HMG Global was not an eligible allottee.

Korea Zinc appealed, and the appellate court has now reversed that decision.

Korea Zinc said the ruling carries significance beyond a simple management control dispute, as it affirms the legitimacy of investment and business cooperation undertaken as part of a company's long-term growth strategy.

The company said the decision is particularly meaningful given that securing a stable supply of critical minerals is directly tied to the competitiveness of key industries such as automobiles and batteries, and that a management decision to forge a strategic alliance with a global partner has now received legal recognition.

Korea Zinc has consistently maintained that the share issuance to Hyundai Motor Group was not a simple capital-raising exercise but a decision aimed at building a cooperative relationship in the secondary battery materials sector and strengthening global supply chain competitiveness.

The company also criticized the Youngpoong-MBK camp for subjecting normal business activities to legal challenge as part of its bid to seize management control.

"The Youngpoong-MBK camp must immediately stop its reckless legal battles, which treat even strategic business cooperation as a tool for boardroom disputes with no regard for Korea Zinc's future competitiveness or growth," Korea Zinc said.

The company also said that given the nature of the critical minerals industry — which affects the national economy and security — long-term corporate investment and global partnerships must be respected, and that repeated litigation must not be allowed to stifle normal business operations.

The ruling puts Korea Zinc in a stronger position to maintain the equity investment relationship that underpins its strategic cooperation with Hyundai Motor Group.

When the partnership was announced in 2023, Hyundai Motor Group said it planned to begin receiving nickel supplies from Korea Zinc on a phased basis starting in 2026, with the aim of sourcing approximately 50 percent of the nickel needed to comply with the US Inflation Reduction Act from Korea Zinc by 2031.

However, the legal battle is not over. Youngpoong expressed regret over the appellate ruling and said it would review the written judgment before deciding whether to appeal to the Supreme Court.

The management dispute between Korea Zinc and the Youngpoong-MBK camp produced conflicting rulings on consecutive days.

On Thursday, the Seoul Central District Court ruled in favor of Youngpoong and MBK in a lawsuit seeking to annul resolutions passed at Korea Zinc's regular shareholders meeting in March last year. The court found that Korea Zinc could not restrict existing shareholders' voting rights by applying cross-shareholding rules as a management defense measure.

Korea Zinc said it would immediately appeal, arguing the ruling contradicts established Supreme Court precedent and a related Supreme Court decision on an injunction case.

Korea Zinc said it will continue to expand critical minerals supply chain cooperation with global partners and pursue new businesses based on resource recycling technology, with the aim of enhancing corporate and shareholder value.


kwater@heraldcorp.com