Successful Case of Designing a Reverse Vesting Structure for Key Personnel

In the process of converting a business operated as a sole proprietorship into a corporation, the client wished to introduce an equity-incentive scheme to secure key personnel over the long term. A simple equity-grant method had the problem that the rights would be fixed regardless of tenure or performance, so a structure was needed under which equity vests in stages upon completing a certain period of service and meeting conditions. Accordingly, the client asked Insight Law Firm to redesign, into a form suitable for Korean commercial law and practical operation, the Reverse Vesting model used by overseas startups.

Your Legal Team designed the contract structure around the following key issues.

First, the central issue was whether the issuance of restricted stock and the vesting structure could be implemented in conformity with the Korean Commercial Act framework. We secured legal stability by designing the contract structure so as to clearly separate the time of stock issuance and entry in the register of shareholders from the time at which ownership vests.

Second, to ensure that the 4-year vesting and 1-year cliff structure the client desired would not cause confusion in actual operation, we clearly stipulated in the contract the vesting requirements, the service-reference dates, and the vesting schedule. This ensured that vesting could be determined without dispute even in situations such as resignation, job change, or leave of absence.

Third, securing the appropriateness and fairness of the repurchase provision for unvested equity was an important task. Insight Law Firm subdivided the grounds for repurchase, such as the type of departure, serious breach of obligations, and underperformance, and clearly set out the repurchase procedure, notice deadlines, and the basis for calculating the repurchase amount, thereby establishing a predictable structure for both the company and the key personnel.

Through this contract structure, the client established a legal foundation on which it could stably carry out large-scale global influencer campaigns and secured the transparency and fairness of a performance-based compensation structure. In particular, it was evaluated as a proactive contract model capable of preventing problems that frequently arise in the digital-marketing field, such as copyright disputes over influencer content, brand damage caused by inappropriate conduct, and the manipulation of view counts. This case is a representative example demonstrating the importance of contract design that manages legal risk in advance in the global marketing and content industry, and it can be used as a reference model when various companies conclude performance-based advertising and influencer campaign contracts in the future.