萬國法律事務所

On December 25th, 2012, the Legislative Yuan passed the amendment of Article 197 of Company Act. The amendment limits the application of Section 3 of Article 197 to public companies only.

The original Section3 of Article 197 of the Company Act did not distinguish the directors of public or non-public companies. It reads “After re-election of directors effected prior to the expiration date of the term of office of existing directors, if any new director elect has, before his/her inauguration of the office of director, assigned more than one half of the total number of shares of the company he/she holds at the time of his/her election as such; or had transferred more than one half of the total number of shares he/she held within the share transfer prohibition period fixed prior to the convention of a shareholders' meeting, then his/her election as a director shall become invalid.” It was not clear whether this limitation also applies to directors of non-public companies. The legislators believe that this article aims at enhancing corporate governance and protecting minority shareholders, which are particularly essential to public company. It will be an unnecessary burden on the directors of non-public companies if they are also subject to such limitation. To clarify, the amendment clearly specifies that only directors of “public” companies are subject to Article 197 of the Company Act.