萬國法律事務所

On March 16, 2012, Taiwan’s Financial Supervisory Commission (FSC) announced new regulations, which may take effect as early as June 2012, which will allow foreign funds, foreign financial institutions, and depository institutions, to partition their voting at shareholder’s meetings.

Pursuant to Article 181 of Taiwan’s Company Act, a shareholder must vote the same on any particular issue with all of its shares. However, this requirement does not reflect the present investment climate. Currently, foreign investment accounts for approximately 31% of the domestic stock market. Most foreign investors do not own their shares as record owners, but through foreign funds, a foreign financial institution, or a depository institution. The company stock ledgers do not record ownership of these shares for the individual foreign investors, but instead the record shows only the institution which holds the shares for them. All the shares under the same institution must therefore vote the same way, regardless how many different investors actually own an interest in the shares. This results in a violation of the shareholders’ rights and weakens corporate governance.

As such, the proposed FSC regulations will allow the aforementioned types of institutions to partition the shares for which it has title ownership based on the individual foreign investors’ ownership interests. However, the new regulations will not be applicable to trust companies, which hold shares in trust for others. The Company Act was already amended last year to allow trust companies to partition their shares when voting on behalf of trust beneficiaries. In other words, the proposed FSC regulation is not something new, because trust companies can already partition their shares. The proposed regulation simply puts foreign funds, foreign financial institutions, and depository institutions in the same position as trust companies. As the result of this change, it is expected that both shareholders’ rights and corporate governance will be enhanced.