Potential stock options for overseas subsidiary employees and executives, Law firm Veat’s legal review.

Law firm Veat received a request to review the legal possibility of granting stock options to overseas subsidiary employees of a domestic parent company A (hereinafter referred to as “the client”).

Law firm Veat comprehensively analyzed the “Special Measures Act for the Promotion of Venture Businesses” (hereinafter “the Venture Business Act”) and related regulations to review the differences between domestic and overseas subsidiary stock option grants and their legal permissibility.

Also, considering that the company was established overseas, it provided clear guidance that it may be subject to different application than domestic regulations, reviewed the legal basis and practical procedures to grant stock options to overseas subsidiary employees.

What points should be considered regarding stock options?

Startups often lack sufficient financial resources, making it difficult to provide financial rewards such as high salaries to founding members or important talents. In such cases, stock options linked to the company's growth can provide significant benefits to both the company and employees.

Through stock options, employees receive the right to purchase company shares at a predetermined price after a certain period, and can receive significant financial benefits as the value of the shares increases with the company's growth. This allows companies that currently lack sufficient financial resources to attract excellent talent and contributes to long-term dedication and contribution to the company. Especially, employees who receive stock options act as stakeholders of the company, rather than simple employees, and have greater responsibility and motivation to perform their duties.

However, stock options directly affect the company's equity structure, so the issuance process is subject to legal regulations. The “Commercial Code” stipulates basic requirements related to the issuance of stock options, and legal review of the eligible recipients, procedures, limits, etc. is necessary. If the dilution of equity or the impact on corporate value is not considered, conflicts may arise with existing shareholders.

In addition, startups and venture businesses may receive different legal benefits than general companies. Startups and venture businesses may be subject to the Venture Business Act if certain conditions are met, so it is recommended to consult with a startup attorney and conduct a legal review to determine what is best.

Also, stock options involve various legal factors such as tax issues, equity dilution, and the legality of recipients, requiring careful review. Especially for overseas subsidiaries, it is important to receive assistance from legal experts as it is necessary to examine the connection with Korean law while complying with the laws and regulations of the respective country.

Law firm Veat, based on its experience of providing legal advice to numerous startups and IT companies regarding stock option design and issuance, analyzes complex legal issues related to stock option issuance and provides legal advice tailored to the characteristics of each company to support the client’s successful growth.

If you have any questions regarding stock options, please contact Law firm Veat.

Thank you.
Law firm Veat