Option Rights
A limited liability company may issue option rights and other special rights [Special Rights Entitling to Shares], if there is a weighty financial reason to do so. A special right is a subscription right issued by the company, which commits the company to issue share for subscription by the holders of such rights, on terms and conditions agreed in advance. A special right may also include the rights holder's commitment to the subscription price. The holder of an option right has the right, but is not obliged, to subscribe shares of the issuing company on the terms and conditions set out in the resolution regarding the option rights issue.
The issue of option rights and other special rights is subject to a resolution of a general meeting of shareholders. The general meeting may also authorize the Board of Directors to decide on the issue of option rights or other special rights. The terms of the option rights shall include provisions on all issues relating to the future subscription of shares, such as subscription price, subscription period and terms of payment. In addition, the option terms shall include provisions on the rights and obligations of the rights holders in future share or other issues, distributions of funds, and corporate restructuring. The resolution regarding issue of option or other special rights, and the terms and conditions of such rights, shall be notified to the Trade Register for registration within a month of the resolution.
If necessary, a so-called option agreement can be entered into between the company and an option holder, should the parties wish to agree on specific issues relating to the particular option holder. The terms of both option rights issued pursuant to a resolution of the general meeting, and possible option agreements are binding between the company and the option holders, and the company cannot subsequently rescind or weaken the option rights without the option holder’s consent.
It is in the interests of the option rights holder that the value of the company’s shares rises above the subscription price set in the option rights terms, which would make it advantageous for the option rights holder to become a shareholder of the company. Subject to terms of the option rights, it may also be possible to take advantage of the higher share price by selling the option rights prior to the subscription period.
Option rights are often used as a part of different financing arrangements. They may also be used in incentive schemes for the company’s personnel and management.