Venture company law compliance, stock purchase option contract modification, core legal risk check.

Law firm Veat successfully performed a legal review regarding the amendment of stock option grant contracts on behalf of an AI learning solutions company (hereinafter "Client").

The Client had already granted stock options to its employees and intended to change the formula for adjusting the exercise price specified in the contract. Accordingly, the Client requested advice on whether the existing contract could be legally changed through an agreement between the parties.

Stock options are a right for employees to purchase company stock at a predetermined price after a certain period of employment, and are widely used to attract outstanding talent or encourage long-term service. However, these stock options must comply with strict procedures stipulated in relevant laws and the company's articles of incorporation in order to have legal effect. In particular, venture companies must meet the requirements stipulated in the "Special Act Promoting Venture Enterprise."

Law firm Veat thoroughly verified the essential items for articles of incorporation and the requirements for a special resolution of the general meeting of shareholders in accordance with relevant laws such as the Venture Enterprise Act and the Commercial Code for this case. In order to grant stock options, the company’s articles of incorporation must include ① the authority to grant stock options in certain cases, ② the type and number of shares to be issued upon exercise of the stock options, ③ the eligibility requirements for the recipients of the stock options, ④ the exercise period of the stock options.

Also, in a special resolution of the general meeting of shareholders, ① the name or designation of the recipients of the stock options, ② the specific method of grant, ③ the exercise price and exercise period, and ④ the type and number of shares to be issued for each recipient must be clearly defined. This prevents the abuse of stock options from harming the interests of existing shareholders or making the company’s capital structure unclear.

In particular, Law firm Veat conducted an in-depth review based on the manual and interpretation of the Venture Enterprise Act, which the Ministry of SMEs and Venture Business presented, regarding the issue of whether it is possible to retroactively change the formula for adjusting the exercise price of already granted stock options.

The Ministry of SMEs and Venture Business states that retroactive changes to stock option grant contracts are generally restricted, but some changes are possible through an agreement between the parties within the range that does not infringe on the interests of stakeholders.

Therefore, Law firm Veat meticulously reviewed whether the formula for adjusting the exercise price to be changed in this stock option grant contract amendment infringes on the interests of existing shareholders and other stakeholders. Specifically, it reviewed whether the adjustment of the stock option exercise price has a rational and objective basis, does not adversely affect the value of the stock, and instead considers the long-term interests of the company and shareholders.

Therefore, venture companies should carefully approach matters related to stock option grants and it is important to minimize legal risks and protect stakeholders through legal advice from a lawyer with experience in stock option advice when making contract changes

Law firm Veat is committed to being a reliable legal partner for startups and venture companies to achieve stable management based on its abundant advisory experience and expertise in stock options, comprehensively analyzing the Commercial Code, the Venture Enterprise Act, and the company's articles of incorporation.

If you need legal advice on stock options, please contact corporate law firm Veat.

You can also find a case study of this case on the Veat law firm blog.

- Checking Core Legal Risks for Stock Option Contract Amendments to Comply with the Venture Enterprise Act

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