Key Issues in Amendment to the Corporate Act Under Discussion

After a year of research and discussions, the Ministry of Economic Affairs ("MOEA") submitted the draft amendment to the Corporate Act to the Executive Yuan in mid-September and said draft is now listed as a priority bill at the Legislative Yuan. However, differences among government authorities regarding three key provisions, namely, the so-called "stock picker clause", the roster of shareholders report, and the company secretariat remain under discussion.

Regarding the issue of the roster of shareholders report, the Ministry of Justice stated that to strengthen the prevention of money laundering, companies must report the actual beneficiary of a corporate shareholder in addition to the roster of shareholders. However, the MOEA believes that disclosures of actual beneficiaries may affect the investment of Angel Investor and start-ups. Also, compared to the shareholders roaster report, which only affects 160,000 non-public companies, the impact of requesting all companies to report the actual beneficiaries is far greater and must be further discussed.

With respect to the so-called "stock-picker clause", the draft bill stipulates that public companies with good performance may distribute dividends twice only with a resolution of the board of directors if permitted in its articles of incorporation. However, the Financial Supervisory Authority ("FSC") holds a more conservative view regarding this amendment and believes that the distribution of dividends twice will lead to a dilution of shareholders' equity and thus holds that a resolution adopted by a shareholder's meeting should be required to justify the legitimacy of the distribution of dividends.

With regard to the introduction of the company secretariat, the draft bill stipulates that a company must establish a company secretariat according to the standard enacted by the FSC and the standard will apply mutatis mutandis to non-public companies. However, FSC is wary of such application to non-public companies and will continue to discuss this issue with MOEA and the Executive Yuan.

Specifically, Mei-Hua Wang, Vice Director of the MOEA, stated that the above issues will be further discussed in inter-department discussions of the Executive Yuan in coming meetings.
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