Review of the legality of the exercise deadline for stock purchase options as stipulated in the articles of association. Law firm Veat
Article posted in 2024-06-26 10:23:29 | VEAT
A Venture-Specialized Law firm Veat reviewed the legality of stock purchase options at the request of an AI (AI) game company (hereinafter referred to as "customer").
The customer set vesting periods and granted stock options exceeding the exercise deadline specified in the articles of association, and approached Law firm Veat to review its legality.
Law firm Veat's Corporate Advisory Team considered whether granting stock options exceeding the exercise deadline specified in the articles of association was lawful, and reviewed it in detail, considering it the core issue of this case.
The court ruled that it does not unduly restrict the rights of the person granted a stock purchase option, and that within the scope of not undermining the basic intent or core content of the articles of association, the exercise deadline for stock purchase options can be freely determined through shareholder resolutions and individual contracts. However, there have been cases where the granting of stock purchase options in violation of the articles of association was deemed invalid, so we provided guidance on the direction to proceed after comprehensively reviewing the basic intent and core content of the articles of association.
The Importance of Legal Review When Drafting Articles of Association
- Drafting articles of association is a necessary procedure when establishing a joint-stock company.
The articles of association are rules that define the company's purpose, name, total number of shares to be issued at the time of establishment, location, and other major details of the company, and are an important document that forms the legal basis of the company. The articles of association are divided into absolute registration items, relative registration items, and optional registration items, and among these, the absolute registration items are those explicitly required by law, and if these are not met, the articles of association are invalid.
- Companies planning to grant stock purchase options must necessarily include provisions regarding stock purchase options in the articles of association.
Stock purchase options are a system that grants employees the right to purchase company shares under certain conditions, and the Commercial Code details specific regulations regarding the type and number of shares, exercise period, etc. In particular, for venture companies, the 「Special Act on Promotion of Venture Companies」 (hereinafter referred to as the "Venture Company Act") details the conditions for granting stock options, which must be observed.
- To grant stock purchase options, you must review not only external legal requirements such as the Commercial Code and Venture Company Act, but also the company's internal articles of association and internal regulations.
If the content specified in the articles of association does not meet the legal requirements, the stock purchase options may not be recognized, so to prevent this, legal advice from a legal professional with extensive experience in handling numerous stock purchase option cases is essential.
Law firm Veat, a venture-specialized law firm, was selected as the only law firm in Korea in the Legal &Accounting Services sector among the 2023 Asia-Pacific region’s high-growth companies announced by the UK economic newspaper Financial Times (FT) and the global research firm Statista (STATISTA). Law firm Veat has accumulated abundant know-how by growing with hundreds of startups and venture companies from early-stage startups to unicorns and decacorns.
Law firm Veat has extensive experience in legal advice on stock purchase options and articles of association review, and stock option related legal advice. If you need legal advice on stock purchase options (stock options) or are curious about regular corporate legal subscription services, please contact Law firm Veat. Thank you. Law firm Veat