The aim of startup companies is to realize capital gains on stocks held by founding members, angels, venture capital firms, etc. exercising EXIT such as IPOs, buyouts, etc. However, it is not preferable to grant majority share to third parties because there are aspects related to voting rights that needs to be consider.
For this reason, startup companies often provide stock options to executives and employees who have contributed to the improvement of corporate value. When issuing stock options, in principle, it is necessary to design and issue tax-qualified stock options that are favorable to directors and employees for tax purposes. It may also be used to increase the potential shareholding ratio and adjust the company's control by issuing stock options to the CEO.
In designing and issuing stock options, the tax-qualified design requires careful consideration of the various tax-qualified requirements. In some cases, the corporate value must be calculated. Attention should also be paid to special exercise conditions in case of buyouts. In addition, problems under the Companies Act, the Registration Act, the Labor Act, and the Financial Instruments and Exchange Act must also be considered.
At GVA, we provide full legal support, from allocation of agreement to registration procedure. GVA will support in formulating stock options scheme that meet the needs of startup companies.