The Executive Yuan Council today passed a draft amendment to the Company Act that would bring Taiwan closer in line with international practices, create a sound corporate governance environment, and allow for stronger business management.
"It is important to have a comprehensive Company Act because it directly affects business operations and shareholders' rights," said Premier Jiang Yi-huah. "The amendment aims to create a healthier system for the long term and supports the administration's policy of making Taiwan an investment-friendly country for foreign companies."
Promulgated on December 26, 1929 and put into effect July 1, 1931, the act has undergone 23 revisions with the last round made January 30, 2013. This law applies to all enterprises operating within the ROC. Today's amendments, drafted by the Ministry of Economic Affairs, will be sent to the Legislative Yuan for approval.
The latest amendment proposes the following:
1. Foreign companies should no longer be required to undergo a certification process to operate in the ROC. (Articles 4, 370 through 387)
2. As with publicly traded companies, privately traded companies should also be exempted from printing certificates of issued shares. They too may appoint a centralized securities custody institution to register such shares. This is in keeping with paperless trends around the world and reduces the risks of shareholders losing physical stock certificates. (Article 162-2)
3. To protect shareholders' rights, matters concerning reduction of company capital or ceasing issues of public shares must be clearly stated on shareholder meeting notices as agenda items, and may not be proposed at the meeting as impromptu motions. (Article 172)
4. In the case of shareholder meetings where voting power can be exercised in writing or by electronic transmission, the matters to be voted on should be clearly stated on meeting notices as agenda items, and may not be proposed as impromptu motions. If such a vote involves election of directors or supervisors, and the company is a publicly traded entity, the candidate names must be announced before the meeting takes place. (Article 177-1)
5. In principle, a company's surplus earnings belong to its shareholders and should not be distributed to employees as bonuses, and hence provisions on employee bonuses should be removed from this act. This is in line with international practices of treating bonuses as expenditure, and conforms to Article 64 of the Business Entity Accounting Act. (Articles 235 and 240)
6. To benefit shareholders, publicly traded entities may now distribute surplus earnings twice a year. The company may authorize its board of directors to make decisions regarding the distributions, and the board should announce results on a designated website by the day following the decision. (Article 240-1)
7. When a company is suspected of illegal conduct, the appointed inspector should be able to inspect a broader range of items, including internal documents. This amendment is intended to strengthen oversight, protect investors, and increase shareholders' ability to gather evidence of wrongdoing. (Article 245)
8. To retain talents, a publicly traded entity may issue new restricted shares to qualified employees, including those hired by the entity's subsidiaries. (Article 267)