萬國法律事務所

On May 1, 2015, an amendment to Company Act passed the third reading in the Legislature mandates that companies, when they are profitable in a given fiscal year, must allocate their annual pre-tax profits to employees.

According to the new amendment, the percentage of surplus profit distributable as employees’ bonuses shall be definitely specified in the Articles of Incorporation. But the amounts or proportion would be left to each company’s discretion. The bonuses can be either cash or stocks. Specifics of the bonuses shall be adopted by a majority of directors at a meeting attended by two-thirds or more of the total number of directors; and in addition thereto a report of such result shall be submitted to the shareholders’ meeting.

However, if companies have accumulated deficit from previous years, earnings should be channeled to cover losses and companies would not have to share a portion of the gains with employees.

The amendment changes the priority of how earnings will be distributed. The amended Company Act stipulates that employees are compensated before companies have made business income tax payments.

This new law is applicable to companies limited by shares as well as limited companies. But it will not apply to state-run enterprises unless the agencies overseeing them stipulate that profits should be shared.

Legislators on both sides of the political spectrum believe the provision will help address the nation’s wealth disparity problem and elevate the standard of living for average workers.