Law firm Cheongchul's Lee Young-kyung attorney conducted an interview with 'Law Issue' regarding 'Precautions when granting stock options'.
Recently, the Supreme Court made an important ruling regarding the stock option system that startups and small businesses utilize to attract talented personnel. The Supreme Court recognized that when a stock option contract becomes invalid due to a lack of legal procedures, the resulting damages should be considered not merely a financial loss, but an infringement of the personal legal interests of the worker. This implies that two key legal requirements — compliance with the articles of incorporation and a resolution from the shareholders' meeting — must be strictly adhered to when granting stock options.
For early-stage startups, stock options are utilized as a key means to attract competent talent in situations where it is difficult to offer sufficient salaries. However, if legal procedures are not properly followed, the company faces serious risks, including the breakdown of trust with employees and potential lawsuits for breach of investment contracts from investors.
Attorney Lee Young-kyung of Law firm Cheongchul stated, “It is important to properly understand that the Supreme Court recognized the damages due to the invalidation of a stock option contract not just as simple financial losses, but as an infringement of personal legal interests, namely the 'right to self-determination regarding the reasonable expectation of acquiring shares or whether to work'” and advised, “Stock options are not merely a form of compensation, but a significant decision that affects a worker's life path, so the company must thoroughly comply with legal procedures in the design and granting process.”
For more details, you can refer to the full interview published.
