萬國法律事務所

On January 17, 2012, Mrs. Jih-Chu Lee, Vice Chairperson of the Financial Supervisory Commission (FSC), announced that after further negotiation, Taiwan’s Ministry of Economic Affairs (MOEA) has agreed to revise the Corporations Act to prohibit corporations from passing capital reduction proposals through extemporary motions at meetings of shareholders.

Since 2004, many Taiwan corporations have passed capital reduction proposals through extemporary motions. Six corporations that have adopted such an approach, including such notable companies as Pacific Construction Co. (2011) and VIA Technologies Co. (2012). Such extemporary motions made at shareholders’ meetings of VIA Technologies Co. received significant attention from the press and the public. With the many shareholders’ meetings approaching this year, the FSC’s new stance is perceived as a response to VIA Technologies Co.’s action.

At an FSC press conference, Chairperson Lee explained that because capital reduction qualifies as a “significant matter” for corporations, extemporary motions should not serve as the means to address such proposals. However, the current Corporations Act does not bar the use of extemporary motions as a means to adopt capital reduction, which has been exploited by certain corporations to reduce their capital. Therefore, the FSC recommended to the MOEA that the Corporations Act be amended in order to address this matter, and the MOEA has concurred.

Current regulations require that any topics of discussion at a shareholder’s meeting must be announced one month prior to the meeting. Following this procedure, a proposal of capital reduction would have to be publicly disclosed. However, an extemporary motion does not require such an announcement, leaving shareholders unaware until the proposal is made. The FSC hopes that through this amendment, capital reduction proposals will be fully disclosed, thus preventing the possible infringement of shareholders' rights.