SEOUL (Reuters) - Korea Zinc's top shareholder Young Poong and private equity fund MBK Partners plan to call for an extraordinary shareholder meeting this year seeking approval to appoint their board nominees, a top executive at the fund said, escalating a takeover battle.

Run by the Choi family, Korea Zinc has been in a bitter fight for control of the $17 billion zinc empire with the co-founding Chang family, whose conglomerate Young Poong made an initial joint offer with MBK in September.

MBK and Young Poong want their representatives to account for more than half the board of the world's biggest zinc refiner, Kim Kwang-il, a partner at MBK, told Reuters in an interview, adding they have yet to decide on the number of new directors.

Currently, Chang Hyung-jin, a Young Poong adviser, is the only member representing Young Poong in the 13-member board.

MBK will also propose the introduction of an "executive officer" system, to separate management from the board, a measure that would require Korea Zinc Chairman Yun B. Choi to give up his management role, Kim said.

"Korea Zinc is a typical example of board of directors not taking into account shareholders' interests in South Korea," Kim said. "To them, the company is synonymous with Choi. That is the corporate governance problem that we want to resolve."

MBK and Young Poong acquired a more than 5% stake in the South Korean firm through a tender offer that closed last week, bringing their combined stake in the firm to nearly 39%.

To counter the proposal, Korea Zinc launched a share buyback programme that closed on Wednesday. It has yet to disclose how many shares were tendered.

Korea Zinc's Choi family can potentially secure the backing of up to 36.5% of shareholders, including Bain Capital and strategic partners such as Hyundai Motor Group, according to analysts.

CORPORATE GOVERNANCE

Korea Zinc has been criticised by some governance experts for its $400 million investment in private equity funds run by a longtime friend of Choi who has been detained and released on bail over his company's alleged involvement in a stock manipulation scheme involving K-pop agency SM Entertainment.

"This is a conflict of interest," Kim said, adding the investments did not get board approval and Korea Zinc's shares had been undervalued partly because of its inefficient capital management.

At a press conference this month, Choi said Korea Zinc took all necessary steps required by the law and internal rules to make a "reasonable and normal" management decision to use surplus money to boost investment returns.

Korea Zinc CEO Park Ki-deok, also told reporters on Tuesday that its board composition and governance structure is "exemplary", with independent directors making up the majority.

MBK and Young Poong have far more than the 3% stake needed to call for a special shareholder meeting. If the request is rejected by Korea Zinc's board, MBK plans to seek a court approval to press ahead and the proposed meeting could be delayed to January or February, Kim said.

Adding new directors would require approval by a majority of voting shareholders.

The change of the board structure to separate management roles requires approval from two-thirds of the votes present, meaning that MBK and Young Poong would need to get support from other shareholders such as the National Pension Service, which has a 7.83% stake.

Shares in Korea Zinc skyrocketed 30% on Thursday to a record high, as investors are bracing for a lengthy takeover battle for the company that could involve on-market purchases by the rival parties.

($1 = 1,380.5500 won)

(Reporting by Hyunjoo Jin; Additional reporting by Cynthia Kim in Seoul and Kane Wu in Hong Kong; Editing by Miyoung Kim and Jamie Freed)

By Hyunjoo Jin