萬國法律事務所

The threshold for the Securities and Futures Investors Protection Center (the Center) to initiate a lawsuit against the directors and supervisors of a listed company has been lowered according to the Securities Investor and Futures Trader Protection Act (the Act). The amendment focuses on “the right for the Center to file a claim on behalf of the shareholders”, “the right to request the Court to dismiss the directors and supervisors of the company”, “the mediation mechanism for small claims”, and “the cutting of the expense for the Center to raise a class action”. It is believe that such amendments will facilitate the Center to strengthen the investor protection.

Before the amendment of the Act, the shareholders mostly rely on the protection mechanism provided by the Company Act. However, as the Company Act has a high threshold to trigger such protection mechanism, it has been criticized that the original protection is not sufficient for the investors.

For example, while the Company Act allows the minority shareholder to raise a claim against the directors and supervisors of a company, only very few cases were actually raised pursuant to the Company Act due to the strict criteria thereof. To provide a more efficient protection mechanism, the Act knowingly excludes the applicability of the Company Act and allows the Center to file a lawsuit to dismiss the directors or supervisors of a company in the event that the Center finds any behaviors of the directors or supervisors that materially damage the company or breach the laws or bylaws.

Report says that the numbers of the responsibility insurance for the directors and supervisors have been increased, and the charted accountants have imposed a more intensive audience over the company. It appears that the Act may provide a better surveillance on the behavior of the directors and supervisors.