萬國法律事務所

The Chairman of Taiwan's Financial Supervisory Commission (FSC) has announced that the FSC will work to reform the current trend of appointing legal persons as directors at companies and financial institutions.

Per Article 27 of the Company Act, if a legal person is a shareholder of a company, it or its appointed representative may be elected as a director of the company. When the legal person itself is elected as a director, it is required further to authorize a natural person to perform the duties and exercise the rights of a director on its behalf. Such legal person may, during the director's term, replace such appointed or authorized representative at will at any time it thinks fit to do so. This rule is also applicable to banks and other financial institutions.

The goal is to put into practice the idea of separation of ownership and management and to maintain the stability of a company's and/or a bank's operations. The authority regulating the operation of banks, namely the FSC, has indicated that its next step in pushing for the amendment of the Banking Act will focus on the restriction on the number of legal persons that can be elected to serve as directors of a bank.

According to the current Article 9 of the Guidelines for the Qualification Requirements and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Banks (銀行負責人應具備資格條件兼職限制及應遵行事項準則), a bank must have at least two seats of "professional directors" on a board of directors composed of five seats or less, and have one additional professional director each time the number of directors on the board is increased by four seats.

A professional director is a person who comes from certain educational background or has certain experiences in the banking industry. According to the FSC, after the amendment of the Banking Act, the FSC will further require professional directors to be natural persons and not representatives of legal persons. In this way, the director may no longer be replaced by the legal person at will, and hence the stability of the bank's operations will be enhanced.

Furthermore, to achieve the new policy of separation in financial institutions, the FSC further indicated that it will further amend the relevant laws and regulations regarding legal persons obtaining shares in or being involving in the operations of a financial institution. In other words, a legal person will not be allowed to obtain a seat on the board of directors or be involved in the operations of more than one financial institution after the amendment of the Banking Act.