[Civil Litigation] First Case Recognizing Liability for Damages Against Company Refusing to Honor Employee's Stock Option

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[Civil Litigation] First Case Recognizing Liability for Damages Against Company Refusing to Honor Employee's Stock Option

On November 11, 2022, EJE LAW successfully represented Mr. A, a former executive of the U.S. subsidiary of Company B, a KOSDAQ-listed company, in the first instance of a stock delivery claim filed against Company B (Seoul Central District Court Case No. 2021Gahap548598).

Company B denied the existence of a stock option agreement, asserting that the agreement lacked the signatures of the parties. However, the court found that, based on the pleadings and evidence presented, a valid stock option agreement had been concluded between Mr. A and Company B, and that Company B had clearly expressed its refusal to perform by rejecting the issuance and delivery of the shares. Accordingly, the court held that Company B was liable to compensate for the damages arising from its refusal to perform the agreement.

This case is particularly significant as it marks the first court decision recognizing a company’s liability for damages—rather than merely ordering share delivery—for refusing to honor a stock option exercise. The ruling comes at a time when the use of stock option agreements as a talent acquisition tool has become increasingly common, and related disputes are on the rise. For further details, please refer to the articles provided in the links below.

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