South Korea’s anti-trust regulator launched an on-site investigation into Korea Zinc’s headquarters. The move comes amid suspicions that Chairman Yun B. Choi used overseas subsidiaries to establish a circular shareholding structure that may violate the country’s fair trade regulations.

Industry sources familiar with the matter said officials from the Fair Trade Commission (FTC) visited the company and collected internal documents as part of the inspection. The move comes around four months after Young Poong and its takeover partner, private equity firm MBK Partners, filed a complaint alleging regulatory violations as they were embroiled in a management dispute with Choi.

The controversy centers around a January 2025 transaction in which 10.3 percent of Young Poong’s shares were transferred to Sun Metals Corporation (SMC), an Australian-based Korea Zinc affiliate. The transfer created a circular ownership loop involving Korea Zinc, Sun Metal Holdings, Sun Metals Corporation, Young Poong, and, again, Korea Zinc.

The arrangement effectively neutralized Young Poong’s voting rights over its 25.4 percent stake in Korea Zinc since Korea’s Commercial Act prohibits mutual voting rights if companies hold more than 10 percent of each other’s shares. Choi thus maintained his control of Korea Zinc despite the shareholder dispute.

At the core of the FTC’s probe is whether Choi’s maneuver violates anti-circular shareholding rules that apply to mutual investment-restricted corporate groups. The groups refer to large conglomerates with assets worth roughly 11.6 trillion won, which accounts for 0.5 percent of Korea’s GDP.

Under current Fair Trade Act provisions, new circular investments among domestic affiliates of such groups are prohibited. However, Choi‘s team is accused of taking advantage of a legal gray area: the rule does not explicitly cover overseas subsidiaries, such as SMC in Australia.

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