Dear Friends, 

The Executive Yuan approved the draft amendment to the Company Act on December 21, 2017, which will be submitted to the Legislative Yuan for further review.  We summarize the draft amendment below:

I. To provide more flexibility

1. Except for public companies, non-public companies will no longer be subject to the restrictions on their capability of investments, lending and provision of guarantees. (Articles 13, 15 and 16)

2. A non-public company may declare dividends or make up losses at the end of every half fiscal year, provided that it is provided in its articles of incorporation ("AOI") (which means dividends can be declared twice a year). (Articles 110 and 228-1)

3. A company limited by shares organized by a single government shareholder or a single juristic person shareholder may select not to set up a board but only have one (1) or two (2) directors, and no supervisor is required.  Non-public companies may also select not to set up a board but only have one (1) or two (2) directors, while a supervisor is still required. (Articles 128-1 and 192)

4. A company limited by shares may decide to issue stock with or without par value at its discretion. (Articles 156 and 156-1)

5. A non-public company may issue special shares where the special shareholders: (i) are entitled to multiple voting rights; (ii) are entitled to veto rights over specific matters, (iii) will not participate in the election of directors and supervisors; and/or (iv) are guaranteed to hold certain seats of directors. (Article 157)

6. Employee incentives (including treasury stocks, employee equity warrants, employees' bonus, new shares preemptive right and new shares with limitation on the employees' rights) can be applied to the employees of the issuers' holding companies or subordinate companies. (Articles 167-1, 167-2, 235-1 and 267)

7. Shareholders of a private company may enter into a voting agreement or voting trust. (Article175-1)

8. The notice period for a non-public company to convene a board meeting is shortened from seven (7) full-day to three (3) full-day.  A non-public company's AOI are permitted to provide written board resolutions, if the written resolution manner is so agreed by all of the directors for the then-applicable agenda. (Articles 204 and 205)

9. Non-public companies will no longer be subject to the restriction that "the total amount of corporate bonds shall not exceed 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)

II. To be more electronicalized and globalized

1. To cope with the book entry trend, only public companies are required to issue shares certificates. (Articles 161-1 and 161-2)

2. An issuer may accept shareholders' proposals in electronic form, in addition to the written form. (Article 172-1)

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

4. The recognition regime of foreign companies is abolished.  Foreign companies can enjoy the same capability as Taiwanese companies have, to the extent legally applicable.  Foreign companies are only required to register their branches to do business in Taiwan. (Articles 4 and 370~386)

III. To enhance the corporate governance

1. Any de facto or shadow directors of a non-public company is also deemed as a responsible person, and may be caught by the responsibilities or liabilities of a responsible person. (Article 8)

2. The rule of "piercing corporate veil" is also applied to a limited company. (Article 99)

3. Any majority of directors of a company may request in writing the chairman to hold a board meeting.  While the chairman fails to hold the meeting, such majority of the directors can call the board meeting. (Article 203-1)

4. In order to simplify the procedures of director nomination, nominating shareholders are only required to describe the candidates' qualifications of education backgrounds and experience, and the board of directors will no longer be required to review and examine nominees' qualifications. (Articles 192-1, and 216-1)

5. Persons entitled to call a shareholders' meeting are entitled to ask the company or stock agent to provide the shareholders' roster. (Articles 210 and 210-1)

6. A non-public company may at its discretion provide the corporate governance personnel in its AOI, while a public company will be subject to the Financial Supervisory Committee's ("FSC") requirements where the FSC deems necessary. (Article 215-1)

7. Unless otherwise exempted, each company shall report its beneficial owners (which refers to directors, supervisors, and shareholders with shareholdings more than 10%) to the e-platform established by the Ministry of Economic Affairs before the fifteen day of each month. (Article 22-1)

Echo Yeh / Mike Lu /Angela Lin