Review cases of articles of incorporation and regulations related to director compensation under the Commercial Law.

Law firm Veat received a request from startup A (hereinafter referred to as the “client”) and reviewed the articles of incorporation related to director compensation and regulations regarding executive compensation and severance pay.

Director compensation constitutes an important part of running a company, and must be determined through a transparent and fair procedure. Therefore, Article 388 of the Commercial Code stipulates that director compensation must be stipulated in the articles of incorporation or determined by resolution of the shareholders' meeting. However, we specifically reviewed Supreme Court precedents to determine whether the board of directors could delegate authority regarding specific compensation amounts or payment methods to ensure efficient proceedings, and based on the legal basis confirmed through this review, we drafted articles of incorporation related to director compensation, executive compensation and severance pay regulations.

In particular, we clearly defined the scope of delegation by the board of directors, allowing for more rapid and efficient decisions regarding compensation payments.

Furthermore, we clearly defined the criteria and procedures for executive severance pay, minimizing the potential for legal disputes upon retirement, reducing uncertainty at the time of executive retirement, and ensuring stable severance pay payments.

The Veat Startup Consulting Team, based on extensive startup expertise, detailed the procedures and methods required in practice during the process of conducting procedures related to director compensation. 

According to Article 388 of the Commercial Code, if the amount of director compensation is not stipulated in the articles of incorporation, it must be determined by resolution of the shareholders' meeting. Therefore, if director compensation is recorded in the articles of incorporation, the procedures outlined in the articles of incorporation must be followed, and if it is not stipulated, the compensation is determined by resolution of the shareholders’ meeting.

Even if director compensation is set at a high amount according to the provisions of the articles of incorporation or resolution of the shareholders’ meeting, it is not invalid solely on the grounds that it is excessive. However, a reasonable proportion must be maintained between the duties and the compensation received. Therefore, when determining director compensation, it is important to thoroughly review the articles of incorporation and internal regulations, and to seek advice from experienced legal professionals who have handled cases for various companies.

Startup · Venture Capital, etc., Legal Counsel for Various Clients, Law firm Veat 

Law firm Veat, based on a deep understanding of the startup ecosystem and extensive expertise, provides various legal advice to startups, including shareholder meetings and board meetings, drafting shareholder agreements, and designing stock options. 

Law firm Veat, which has grown together as legal counsel for a wide range of clients from early-stage startups to venture capital firms, is contributing to increasing the value of startups.

Law firm Veat will continuously support the client’s success by providing a regular legal subscription service for the many legal issues considered by early-stage startups/companies. 

Thank you.

Sincerely,

Law firm Veat