[Consultation] Review of Stock Option Exercise Rights

Law firm Veat advised A Venture Company’s B employee on whether an agreement to waive stock options (stock options) granted by B employee is valid, considering that B employee retired within two years without fault.

The Venture Company’s B employee retired earlier than the required two-year term of employment granted by the company, without any fault. Therefore, A Venture Company sought to reach an agreement with B employee to waive the stock options (stock options) granted at the time of employment, and asked for advice on the validity of this agreement.

According to the Commercial Act, executives must be employed for at least two years from the date the stock options are approved by the shareholders’ meeting in order to actually exercise them and acquire shares. (Article 340(4)(1) of the Commercial Act)

However, even if within two years, in the case of a listed company, if an employee retired or resigned within two years after receiving company stock options due to a non-faulty reason, they can still exercise the stock options. (Article 542(3) of the Commercial Act)

Nevertheless, in the case of an unlisted company, if an employee retired or resigned within two years after receiving company stock options due to a non-faulty reason, such as dismissal, the stock options cannot be exercised. (Decision of the Supreme Court on March 24, 2011, Case No. 2010Da85027)

Law firm Veat first reviewed the stock option (stock options) agreement between A Venture Company and B employee, and then reviewed the validity of the waiver and settlement agreement on stock options based on the purpose of the stock options. Stock options are intended to provide employees with an economic incentive to work hard for the company, and are used accordingly, as they are specifically regulated by the Commercial Act and the Venture Company Act (Special Act for the Promotion of Venture Companies) regarding the conditions and duration of exercise.

Law firm Veat possesses abundant case review experience related to stock options (stock options) and offers stock option agreement forms and explanatory manuals free of charge based on its accumulated experience. You can refer to these forms and manuals if you need them, and feel free to contact us if you require further review.

Thank you.