Legislative Yuan Passes Revision of Company Reorganization Provisions

On Jan. 13, the Legislative Yuan passed a partial revision of the Company Law designed to speed up the corporate reorganization process by permitting companies facing temporary operating difficulties, financial problems, or improper management to be monitored under a complete legal mechanism. The revision allows companies with the potential to recover to reorganize themselves and enables international corporate acquisition funds to enter the Taiwan market, thereby heightening the efficiency of capital utilization. This is particularly important to financial institutions.

　　The revision adds a provision exempting companies that issue new shares in accordance with a reorganization plan from the requirement to provide priority purchase rights to employees and original shareholders, thus facilitating the reorganization procedure. When a number of persons are supervising a reorganization project, reorganization matters are handled by majority decision and those reorganizing the company are restricted to passive qualification as its president.

　　In addition, the ratio required for resolutions on reorganization plans by meetings of materially interested parties is revised from the original two-thirds to one-half. If the meeting of materially interested parties is unable to agree on a reorganization plan within one year after the arbitration judgment, then the courts may terminate the reorganization. For more related information, please consult this website: http://npl.ly.gov.tw/do/www/newRecord.

Old and Revised Corporate Reorganization Provisions of the Company Law

　

Revised Provision

Original Provision

Influence

Additional provision exempts companies issuing new shares according to a reorganization plan from the requirement to give employees and original shareholders priority purchase rights

None

Preventing original shareholders from maliciously using priority purchase rights to obstruct participation by parties sincerely intending to invest

When a number of persons are supervising a reorganization plan, actions can be taken when more than half of the supervisors agree

No clear rules

With no clear rules in the past, when reorganization supervisors held differing opinions it was often impossible to reach a resolution and the plan was shelved. The revision eliminates this problem

In voting by meetings of materially interested parties, only a 50% yes vote is needed for passage

Two-thirds majority needed

Creditors and shareholders have different standpoints, and this relaxation can avoid the waste of time in negotiations

In the reorganization timetable, a feasible reorganization plan must be presented within one year of the delivery of the arbitration judgment; otherwise, the courts can terminate the reorganization

No clear rules

Preventing malicious shareholders or operators from using the protective umbrella of reorganization to control a company permanently

Source: Legislative Yuan

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Revised Provision	Original Provision	Influence
Additional provision exempts companies issuing new shares according to a reorganization plan from the requirement to give employees and original shareholders priority purchase rights	None	Preventing original shareholders from maliciously using priority purchase rights to obstruct participation by parties sincerely intending to invest
When a number of persons are supervising a reorganization plan, actions can be taken when more than half of the supervisors agree	No clear rules	With no clear rules in the past, when reorganization supervisors held differing opinions it was often impossible to reach a resolution and the plan was shelved. The revision eliminates this problem
In voting by meetings of materially interested parties, only a 50% yes vote is needed for passage	Two-thirds majority needed	Creditors and shareholders have different standpoints, and this relaxation can avoid the waste of time in negotiations
In the reorganization timetable, a feasible reorganization plan must be presented within one year of the delivery of the arbitration judgment; otherwise, the courts can terminate the reorganization	No clear rules	Preventing malicious shareholders or operators from using the protective umbrella of reorganization to control a company permanently