[Consultation] Granting Stock Options to Incoming Employees

Law firm Veat was commissioned by A, a global artificial intelligence startup, to conduct a legal review of the possibility of granting stock options to prospective employees.

A, a global artificial intelligence startup, requested that Law firm Veat review whether it could provide stock options (employee stock purchase options) to prospective employees before hiring key personnel.

Accordingly, Law firm Veat conducted a comprehensive review of relevant laws such as the “Companies Act” and the “Special Act on Promotion of Venture Companies” (hereinafter referred to as the Venture Companies Act), as well as A’s articles of incorporation and internal regulations, and provided legal advice regarding the feasibility of granting stock options (employee stock purchase options) to prospective employees on their date of employment, and a legal opinion on whether it was possible to grant stock options (employee stock purchase options) to prospective employees in advance.

If the employee stock purchase option system is utilized, from the startup’s perspective, it may be difficult to guarantee high salaries during hiring, but it is possible to secure excellent talent, and naturally, it can encourage the loyalty of personnel towards the growth of the startup. From the personnel’s perspective, because they can utilize their abilities to contribute to the growth of the startup and obtain significant profits through stock options (employee stock purchase options), the employee stock purchase option system is a win-win situation for both the startup and the personnel.

However, when a startup grants employee stock options (employee stock purchase options) to its personnel, there are many diverse decision-making factors regarding the timing of the grant, the number of shares granted, and the exercise period (vesting schedule). Among these, the stock option (employee stock purchase options) exercise price, which is the most frequently considered by the company and the founder, has been amended by the amendment of the Venture Companies Act in February 2022, and the employee stock purchase option system is a win-win situation for both the startup and the personnel. Therefore, any company wishing to utilize the employee stock purchase option system should review the amended Venture Companies Act.

Law firm Veat is providing consulting services regarding the employee stock purchase option system in accordance with the Venture Companies Act amended in February 2022. If you need consulting services for granting stock options, including amending the articles of incorporation, reviewing the timing, number, and exercise period of stock options, and drafting stock option agreements, please contact Law firm Veat at any time.

Thank you.
Law firm Veat