[according to the law of authority] 56.Stock Options, To Not Go To Litigation

*This content was translated by AI.

Today, let's find out how to keep stock options from going to litigation.

Start-up CEO A put up stock options to catch key developers in the early days of the start-up. After looking at the contract form I found online, I also held a shareholders' meeting in my own way. It was a sincere decision, "Let's do well together when our company grows up later." However, three years later, the developer filed a lawsuit after leaving the company.

Surprisingly, similar patterns of things happen more frequently than expected. Similar things happen with idols. In general, stock option disputes burst at just that timing, when a start-up gets on a growth trajectory. As the company does well, profits are made, and profits are made, so there is a reason to fight.

If the procedure is wrong, the contract is effective I don't

Stock options do not arise just by writing a contract. The Commercial Act must require ① provisions based on the articles of incorporation, ② a special resolution at the general shareholders' meeting. If any of these are omitted, the contract itself is invalid.

In fact, the Supreme Court ruled that the entire stock option contract, which had already been signed, was invalid in a case where it was confirmed that there was a defect in the resolution of the general shareholders' meeting. From the perspective of executives and employees, they believed and worked for years, but the right itself has disappeared.

If an employee leaves, stock options will disappear, of course?

I think that when you retire, stock options automatically disappear as well. In some cases, it can be wrong. Let's take an example. As the company reorganized its team by expanding its business, it asked employee B to "move to an affiliate." B accepted and wrote down the reason to the retirement home as "disposal (business restructuring)." The company later claimed that the stock option was automatically canceled, but the court ruled in B's favor. It was an involuntary turnover due to company needs, and it was because it was an exception to the contract.

The key here is the wording of the retirement document. The difference between "resignation by one's own will" or "termination of employment depending on the company's circumstances" can change the outcome of the lawsuit.

If you miss the timing of the dismissal, the dismissal is invalid

Employee C received a notice of dismissal just 11 days before the first available exercise date of stock options. At that time, the company was issuing new shares at 350,000 won per share, and C's exercise price was 9,433 won. Hundreds of millions of won in profits were 11 days away. The court considered the dismissal itself invalid, saying, "The dismissal at this point is a harsh disciplinary action that violates the right to expect." Even if there was a reason for disciplinary action, timing was a problem.

If you are considering disciplinary action against an employee who is approaching the besting point, you must first undergo a legal review. Regardless of the intention, it can be read as "firing to take away stock options."

If you want to cancel, you have to write it in the contract

The company held a board meeting and canceled employee D's stock option. The reason was that the contribution was low, and in other words, "I couldn't even pay for the meal." However, the cancellation clause of the contract only stated "in case of damage to the company through intentional and gross negligence" and "company bankruptcy and dissolution". The court ruled that the cancellation for reasons not in the contract was not effective. Reasons such as "low contribution," "not in line with the company's culture," and "less than expected performance" must be written in the contract from the beginning to take effect.

There is a common regret of representatives who have suffered stock option disputes. "If you made it properly in the beginning". Let's remember that if you do these things right for the first time, you can prevent disputes years later, such as overhauling the articles of incorporation, general meeting resolutions, reasons for cancellation, retirement provisions, and event period design.

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*This content was translated by AI.