CORPORATE GOVERNANCE STRENGTHENED BY REVISION OF SECURITIES AND EXCHANGE ACT
Taiwan’s Legislative Yuan moved to enhance corporate governance in Taiwan by revising the Securities and Exchange Act on 20 December 2005. President Chen promulgated the revision on 11 January 2006 and the revision enhances the independence and performance of boards of directors, increases the responsibility of managers and professionals, and aims to prevent insider trading and manipulation of the stock market.
The major revisions are as follows:
1. Articles 14-2 and 14-4 stipulate that public-listed companies must appoint at least two independent directors and at least one-fifth of the total number of directors.
2. Public-listed companies are required to establish an auditing committee. The members of such committee are permitted to act as substitutes for supervisors per Article 14-4 when necessary, for the purpose of enhancing the protection of shareholder rights. According to the relevant regulations, this committee must be comprised completely of independent directors and must have at least three persons, with one of these serving as convener and at least one of whom must possess expertise in the fields of either accounting or financing.
3. The liability of issuers and their responsible persons, the issuers’ employees who placed their signatures or seals on such financial reports, shall be increased where investors lose money as a result of fraud in connection with any financial reporting.
4. A new provision, designed to prevent insider trading, prohibits a company’s directors, supervisors and managers from buying or selling company shares before, or within twelve hours after, any important news that affects the company’s share price is publicized.
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