Article 39(Limits on Granting of Employee Stock Options) #
(1) A company implementing the employee stock ownership program may grant members of its employee stock ownership association the right to subscribe new shares or purchase treasury shares held by the company (hereinafter referred to as “employee stock option”) at a predetermined price (hereinafter referred to as “exercise price”) during the period specified in a resolution passed at its general meeting of shareholders (hereinafter referred to as “period for offering”) within 20/100 of the total number of outstanding shares, as stipulated by its articles of incorporation: Provided, That where employee stock options so granted do not exceed 10/100 of the total number of outstanding shares, such employee stock options may be granted by resolution of the board of directors, as stipulated by articles of incorporation.
(2) If a company implementing the employee stock ownership program intends to grant employee stock options, it shall stipulate the following matters in its articles of incorporation:
1. The provision that employee stock options may be granted to members of the employee stock ownership association;
2. The classes and number of shares that may be issued or transferred upon the exercise of employee stock options;
3. The provision that employee stock options already granted may be revoked by resolution of the board of directors and the grounds for revocation;
4. Requirements for resolution of the board of directors or the general meeting of shareholders on the granting of employee stock options.
(3) The resolution by the general meeting or the board of directors prescribed in paragraph (1) by a company implementing the employee stock ownership program on the granting of employee stock options shall include the following:
1. Method for granting employee stock options;
2. Exercise price of employee stock options and the adjustment of such price;
3. Periods set for offering and exercising employee stock options;
4. Classes and number of shares that may be issued or transferred upon the exercise of employee stock options.
(4) The period for offering shall not be less than six months nor more than two years from the date specified at the general meeting of shareholders or by the board of directors under paragraph (3) for granting employee stock options.
(5) When a company implementing the employee stock ownership program grants employee stock options, it may allow stock option holders to exercise the employee stock options during the period for offering or a period separately determined for exercising the stock options after the end of the period for offering. If a period after the end of the period for offering is determined as the period for exercising the options, the period of offering shall be deemed extended, notwithstanding paragraph (4).
(6) When a company implementing the employee stock ownership program intends to grant employee stock options, it may exclude members of its employee stock ownership association, who have been employed for a period less than the employment period specified by Presidential Decree, which shall not exceed three years, from employees eligible for stock options.
(7) No employee stock option may be transferred to a third party: Provided, That if a person to whom an employee stock option has been granted is dead, the stock option shall be deemed to have been granted to the deceased’s heir.
(8) Notwithstanding Article 341 of the Commercial Act, when a member of employee stock ownership association exercises an employee stock option, the company implementing the employee stock ownership program that granted the employee stock option may acquire treasury shares in order to issue the shares to such member: Provided, That the value of the shares so acquired shall be limited to the amount for which dividends can be distributed in accordance with the provisions of Article 462 (1) of the same Act, and if the value of treasury shares so acquired exceeds the limit, such treasury shares shall be sold within the period specified by Presidential Decree.
(9) Articles 350 (2), 351, 516-9 (1), (3), and (4), and the former part of Article 516-10 of the Commercial Act shall apply mutatis mutandis where new stocks are issued by exercising stock options. <Amended on Dec. 8, 2020; Dec. 29, 2020>
(10) The procedure for granting employee stock options, the exercise price, the exercise period, and other necessary matters regarding the operation of the employee stock option program shall be prescribed by Presidential Decree.