We would like to note first of all that Call Option and Put Option discussed below differ from the call and put options that are defined and governed in the Capital Markets Board (“CMB”) regulations and are related to publicly traded companies. CMB regulations define circumstances and conditions under which these options shall materialize and how they are to be exercised in a publicly traded company, etc. As for call and put options that may be agreed in a shareholders’ agreement in a non-public corporation as discussed below, parties may agree on these matters freely, depending on their investment goals, demands and wishes. On the other hand, these rights that are governed in a shareholders’ agreement are not vested in to reap a profit from the price differentiation of the share like the way in options traded in exchanges. Rights described below – in particular, deadlocks in a corporation etc.- govern the right to remain or quit as a shareholder in order to encourage and drive the parties to reach an agreement.


A call option that a shareholder may be entitled to pursuant to a shareholders’ agreement allows the option holder to purchase the shares of the other shareholders if and when specific conditions are met.

When a call option is granted, the amount of shares, which is one of the material elements in a sales agreement to be executed between the parties upon the exercise of the option shall have been defined and determined.  Share price, that is another material item, may be stated or the method to appraise the price may be agreed by the parties in the agreement as well.

In this respect, a call option may be defined as a “right that allows the option holder to purchase all or any shares of the other shareholder at a pre-agreed price and that puts the other party under the obligation to sell its shares at the same price.”

Legal Nature of Call Option and How to Exercise It

As a call option is materialized on a unilateral statement by the option holder, this right is called a formative right in the doctrine.

Parties may define various mechanisms in the agreement, including the option holder’s obligation to exercise the option within a specific period of time or the requirement that a call option shall be valid only if certain conditions are met. Where it is agreed in the agreement that the call option is subject to a specific time period, this option shall be forfeited unless it is exercised within the agreed time period or the option holder shall have the right to exercise his option if certain conditions agreed in the option contract materialize and are met.

Depending on investor demands, shareholders may agree on various different mechanisms in their agreement about the term, conditions or other issues related to the call option,

Advantages of Call Option

  • In the case of a deadlock, for instance, when the general meeting may not convene or resolutions are not adopted even if the meeting is held, or there is a dispute between the shareholders, this call option defined in the shareholders’ agreement shall allow a shareholder to buy the shares of the other shareholders to whom the deadlock is attributable or with whom a dispute arises. This way, a deadlock in the corporation is avoided.
  • The shareholding is kept and maintained intact.
  • It allows to enjoy controlling powers over the shareholding.
  • It allows an investor to invest in a company with less risks.
  • Companies may attract investors more easily.


Put option is a type of option that allows its holder to sell all his shares or any part of them to the other shareholder at a specific price.

Parties may define a fixed price in the agreement or may agree on how to appraise the price.

The sales agreement shall be formed upon the unilateral notice of the put option holder, and the “seller shareholder/ option holder” who exercises his such right shall be under the obligation to transfer the title to shares, and on the other side, the “purchaser shareholder” shall be under the duty to pay the sales value at such price agreed in the agreement or appraised according to the method defined therein.

Legal Nature of Put Option and How to Use it

Just like the call option, a put option is a formative right as the sales agreement is to be formed upon the unilateral expression of intention by the put holder.

Just like the call option, put option, too, may be exercised only if certain conditions (deadlock, etc.) arise,

Put option may be defined in a shareholders’ agreement to allow private equity funds or minority shareholders to exit from the company or to avoid any potential deadlock or to punish the party acting in breach of the agreement.

Advantages of a Put Option

  • It allows minority shareholders to exit.
  • If an investor wishes to enjoy a privilege to opt out from the company without any loss in the case that market values of shares drop, put option gives such opportunity to the investor.
  • It encourages parties to reach a settlement in the case of a deadlock in the company.
  • It allows an investor to invest in a company with less risks.
  • Companies may attract investors more easily.