Exercising Korean Stock Options in Companies in Korea under the Korean Commercial Code

Exercising Korean Stock Options in Companies in Korea under the Korean Commercial Code

Stock options, in Korea, are often provided to senior foreign and domestic employees of companies in Korea. For stock options, in non-listed/non-public companies in Korea, to be exercisable by employees in Korea (thus a valid option) the option must be approved, in most cases, at a general shareholders meeting of the Korean company. Another article that may be of interest can be found at: Granting & Exercising Stock Options in Korea.  

The articles of incorporation of the Korean stock granting company should be amended or should note at formation, at a minimum, the following:

  1. An intention that a stock option or stock grant may be granted in specified cases;
  2. The number of shares to be issued or transferred in the case of exercising the stock option;
  3. Qualifications of a person to whom a stock option is to be granted;
  4. Exercising period of the stock option; and
  5. An intention that the granting of the stock option may be revoked by a resolution of the board of directors in specified cases. Korea Commercial Act art. 340-3(3)1.

Additionally, the company granting the options should execute an agreement with the individual granting the options and the stock option should, only, be given to authorized recipients. When forming a company in Korea, it is advisable, because of this and a variety of other issues, to use much more than the typical form Korean Articles of Incorporation and to also have a Korean-centric joint venture agreement if your company ownership consists of more than one shareholder.

If your company in Korea intends to grant stock options or you have received stock options in Korea, please consult with an attorney in Korea who deals with these types of matters. I have seen a recent incident that could have been avoided if the foreign-capital invested company and the Korean employee, simply, had a counsel that was not, only, aware of Labor and Employment Law. Sorry for the vent. I see too often those making assumptions that lead to issues for shareholders, managers and employees.

Additionally, in many cases, it is advisable to consult with an accountant. Most leading law firms that handle business matters for expats have accountants that work for or with the law firm. Thus, often you can kill two birds with one stone with a consultation with your Korean law firm. We work with a great accountant with international experience.

If you would like a consultation with an English-speaking lawyer in Korea, please schedule a call at: Schedule a Call with an Attorney.

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