Economics Ministry Completes Partial Revision of Company Law

         The Ministry of Economic Affairs (MOEA) completed a draft revision of the Company Law at the end of September, hoping to provide a better regulatory environment for company operations and corporate governance. After the Executive Yuan approves the draft, it will be sent to the Legislative Yuan for deliberation and passage.

The Department of Commerce of MOEA, which was responsible for the draft’s formulation, notes that 14 articles are being revised and one abolished. This marks the first major revision of the law since 2001. The main points of the revision are as follows:

1. Other parties may apply to use the names of companies that have not completed liquidation within five years after being dissolved, withdrawn, or abolished. This alleviates the difficulty of companies finding names for themselves.
2. In consideration of the heavy impact on the interests of original investors when listed companies are delisted and their financial conditions switch from transparent to opaque, publicly listed companies that wish to delist will be required to have their delisting approved by an extraordinary shareholders’ meeting (attended by at least two-thirds of all shareholders, and with more than 50% of those attending casting affirmative votes). This protects the interests of shareholders.
3. When a company repurchases its preferred shares, whether it does so using profits or the proceeds of new share issues, or some other source of funds, is its own internal affairs and should be decided by the company itself. The revision deletes the requirement that preferred share repurchases must be carried out using profits or the proceeds of new-share issuance. This increases flexibility for companies.
4. To help publicly-listed companies incentivize employees and consolidate their loyalty, a new stipulation allows companies that repurchase their own shares for distribution to employees to restrict the employees from selling the shares for a certain period of time. When publicly-listed companies issue new shares to incentivize employees, the securities authority may establish regulations to replace the stipulation in Article 267 of the Company Law regarding the ratio of shares to be set aside for purchase by employees. This gives companies greater flexibility in planning employee remuneration.
5. In view of the fact that capital put up by shareholders is no longer limited to cash, and that the return of capital when a company reduces its capitalization is also no longer limited to cash, the revision stipulates that share values may be returned in the form of non-cash property so as to give companies greater flexibility in the return of capital. As this has a huge impact on the interests of shareholders, however, there is also a stipulation requiring such returns to be approved by a shareholder’s meeting and agreed to by the affected shareholders themselves.
6. To give minority shareholders a chance to be elected as directors, the revision stipulates that candidates receiving relatively large numbers of votes representing voting rights are elected as directors, and are not subject to charter exception. This implements the basic spirit of corporate governance and protects the interests of small shareholders.

For more related information, please visit this website: http://w2kdmzl.moea.gov.tw/user/news/detail.asp?id=11974.

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