Dear Friends:

On 6 July 2018, the Legislative Yuan passed the third reading of an amendment to the "Company Act" ("Amendment"), which is subject to the official announcement by the President.  The enforcement date will be further decided by the Executive Yuan after the President’s announcement.  We summarize the major changes below:

1. A company shall follow the laws, regulations and business ethic rules, and may adopt measures to facilitate and enhance public interest when operating its business, so as to fulfill its corporate social responsibility. (Article 1) 

2. The Amendment abolishes the recognition system in respect of foreign companies.  A foreign juristic person will have the identical legal capacity as an R.O.C. company, subject to the restriction of laws; if it would like to do business in Taiwan, it only needs to apply for the branch office registration. (Articles 4 and 370~386) 

3. The liabilities of de facto directors and shadow directors (which only apply to a public company before the Amendment) will also apply to a non-public company. (Article 8)

4. If there is any forgery on corporate registration related matter which is rendered guilty conclusively at criminal court, the competent authority will at its discretion or upon application by an interested party, revoke or abolish the corporate registration. (Article 9) 

5. The limitation on the re-investment amount for non-public companies is removed. (Articles 13)

6. In addition to the capital threshold (set as NT$30 million before the Amendment), a company, while not reaching the capital threshold, but reaching a certain scale, shall also be subject to the requirement to have its financial statements audited by a certified public accountant. (Article 20) 

7. A company is required to report information of its shareholders holding more than 10% shares, directors, supervisors and managers regularly on an annual basis by means of electronic transmission to the e-platform established by the competent authority.  A report within fifteen (15) days is also required for any changes. (Article 22-1) 

8. The Amendment removes the requirement that a manager must have a residence or domicile within the territory of Taiwan. (Article 29) 

9. Rule of piercing corporate veil also applies to limited companies. (Article 99) 

10. A company established or held by the government or a single juristic person may choose to have only one (1) or two (2) directors, without having a board of directors, or any supervisor, provided that for a non-public company, the supervisor is still required while it may choose to have only one (1) or two (2) directors without a board of directors. (Articles 128-1 and 192)

11. A company limited by shares may issue shares at or free from any par value at its discretion. (Articles 129, 156 and 156-1)

12. Equity capital to be contributed by the promoters may be in the form of assets or technical know-how required for the business of the company, other than cash. (Article 131)

13. A non-public company may issue special shares with multiple voting rights, veto power over specific matters, no entitlement to election of directors and supervisors, and right to hold certain seats of directors. (Article 157)

14. To follow the trend of scripless stocks, only public companies are required to issue shares certificates. (Articles 161-1 and 161-2)

15. The Amendment abolishes the bearer share certificate system. (Articles 166 and 447-1) 

16. Employee incentives (including treasury stocks, employee stock warrants, employee remuneration, preemptive right for new shares and issuance of new shares with limitation on the rights) will apply to employees of controlling or subordinated companies. (Articles 167-1, 167-2, 235-1, and 267)

17. The Amendment does not permit any provisional motion in a shareholders’ meeting in relation to capital reduction, termination of public offering status, release of non-competition obligations by directors, capitalization of earnings or surplus. (Article 172)

18. In addition to the proposal in written form, a company may accept the shareholder's proposal to the shareholders' meeting made in electronic form. (Article 172-1)

19. A non-public company may provide in its articles of incorporation to hold the shareholders' meetings by means of video conferences or other methods announced by the competent authority. (Article 172-2)

20. Shareholder(s) of a company continuously holding a majority of the total issued shares of the company for three (3) months or more may convene the extraordinary shareholders' meeting on his/her/their own. (Article 173-1)

21. Shareholders of a non-public company may enter into a voting agreement or voting trust among themselves. (Article175-1)

22. In order to simplify the nomination procedures for directors and supervisors, nominating shareholders are only required to illustrate candidates' names, education backgrounds and experience.  The requirements for the board of directors to review the qualifications of the candidates are also removed. (Articles 192-1, and 216-1)

23. Where a chairman declines to a written request by a majority of the directors to convene a board meeting, such majority of the directors may convene the board meeting on their own. (Article 203-1)

24. The meeting notice period for a board meeting of a non-public company is shortened from seven (7) full days to three (3) full days.  A non-public company may also specify in its articles of incorporation to allow written board resolutions, with no need to hold any physical meeting, if agreed by all directors. (Articles 204 and 205)

25. Persons entitled to convene a shareholders' meeting are entitled to request for a copy of shareholders' roster from the company or stock agent. (Articles 210 and 210-1)

26. If so specified in its articles of incorporation, a company may declare dividends or make up losses at the end of every quarter or half fiscal year (which means that dividends can be declared up to four (4) times a year). (Articles 228-1)

27. Shareholder(s) of a company continuously holding 1% or more of the total issued shares of the company for six (6) months or longer may apply, with the reasoning, evidences and explanation provided, with the court for appointment of an inspector to inspect business operations, financial accounts, assets, specific matters and documents and records of specific transactions. (Article 245)

28. Non-public companies are no longer subject to the restriction of the total amount of corporate bonds not exceeding the balance of the assets less liabilities of the company, and are permitted to issue convertible corporate bonds and corporate bonds with warrants. (Articles 247 and 248)

29. In additional to its Chinese name, a company may apply to register a name in a foreign language. (Article 392-1)

Mike Lu / Angela Lin