Taishin Financial Holding Co's (
The Financial Committee of the Legislative Yuan unanimously approved a motion requiring the Ministry of Finance to stop the planned merger between Chang Hwa and Taishin Financial, citing "irregularities" committed during the board's decision-making process which could damage the rights and interests of its shareholders.
The committee also demanded that the Financial Supervisory Commission carry out a probe into what they termed as a "forced acquisition" of Chang Hwa by Taishin Financial and to bring related parties to justice if the regulator found any irregularities involved.
"The decision of [the] Chang Hwa [board of directors] last week is invalid, as the flawed proceeding has violated the Company Act (
Last Saturday, Chang Hwa voted in an ad hoc board meeting to hire financial advisers to evaluate and decide the terms of a share swap agreement with Taishin Financial. However, four government-appointed board directors and one private board member had walked out in protest against the vote, which they said was not included in the original agenda of the meeting.
Shih said that the commission could revoke the board's illegitimate decision and even remove "ineligible board directors and supervisors" from the board if necessary, citing stipulations in Article 61-1 of the Banking Law (
Taishin Financial, the nation's second largest financial group, is the largest shareholder of Chang Hwa, the country's seventh-biggest lender.
Taishin Financial controls a 25 percent stake and eight of the 15 board seats of Chang Hwa. The Ministry of Finance holds an 18 percent stake in the bank.
The incident has drawn a lot of fire from legislators, who urged the Financial Supervisory Commission to flex its muscles by tightening supervision of financial institutions.
Under the legislators' demand, Shih agreed to deal with Taishin Financial's failure in avoiding a conflict of interests in Chang Hwa's board meeting within three days.
The commission will also launch a full-scale inspection of companies and board directors that did not comply with the law within the next two weeks, he said.
In response, Chang Hwa's acting spokesman William Lin (
Lin added that no date had yet been set for the meeting, dismissing reports that the next meeting would take place on Friday.
Taishin Financial also said in a statement released late last night that it respected the authorities' opinion and agreed with Chang Hwa's decision to hold another board meeting.
Meanwhile, the Ministry of Finance said that while it respected the financial committee's resolution, the lawmakers' suggestion might jeopardize minor shareholders' rights and interests.
Considering Taishin Financial's majority power on the board, the firm could have made decisions on its coveted merger issue with Chang Hwa even without the support of the government, which holds only four of the 15 board seats, a high-ranking official said on condition of anonymity