萬國法律事務所

Since last 2011, Taiwan’s Legislative Yuan has made a series of amendments to the Company Act, leading to changes that may affect current corporate management methods and procedures. Until presently, of those amendments that have come into effect, there are 4 major changes of note. These are 1) the voting power of company shares bound by pledge(s) held by directors and supervisors, 2) the issuing of restricted shares for employees, 3) the electronic transmission of votes during a shareholders’ meeting, and 4) the distribution of legal reserves.

Article 197-1, paragraph 2 of the Company Act states that “where the director of a company, which shares have been publically issued, has created a pledge on the company’s shares where more than half of the company’s shares are held by him/her/it at the time he/she/it is elected, the voting power of the excessive portion of those shares shall not be exercised and the excessive portion of shares shall not be counted in the number of votes of shareholders present at the meeting.” The same restriction also applies mutatis mutandis to supervisors through Article 227 of the Company Act. It may be expected that such an amendment, if applicable, will lead to fluctuations in the way that shareholders’ meetings are held.

Article 267, paragraph 8 grants companies the right to issue restricted shares for employees and requires that an adoption of such issuance requires a majority of the shareholders present who represent two-thirds or more of the total number of the company’s outstanding shares.

Amendments to Article 177-1, paragraph 1 further establish that the relevant authority in charge of securities affairs shall, as necessary in view of the company’s scale, number of shareholders, shareholder structure and other essential factors, require a company to adopt electronic transmission as one of the methods for exercising voting power. In light of this new change, the Financial Supervisory Commission of the Executive Yuan announced that when a TWSE/GTSM listed company exceeds 10 billion NT Dollars in capital and has over 10 thousand shareholders, electronic transmission of vote as a voting method at a shareholders’ meeting will be required.

Finally, Article 241, paragraph 3 of the Company Act provides that “where the legal reserve is distributed by issuing new shares or by cash, only the portion of the legal reserve that exceeds 25 percent of the paid-in capital may be distributed.” This amendment lowers the previous threshold for such a distribution from 50 percent to 25 percent, granting more liberty to companies regarding their policy of distributing legal reserves if the company incurs no loss, as required by the first paragraph of Article 241.