Fri, Jul 03, 2009 - Page 12 News List

Cabinet upholds shareholder rights

SMALL INVESTORS: The proposed amendment would require listed firms to set up an electronic voting system and give them more flexibility in distributing earnings

By Shih Hsiu-chuan  /  STAFF REPORTER

The Cabinet yesterday approved a proposed amendment to the Company Act (公司法) designed to better protect the rights and benefits of small shareholders.

If approved by the legislature, securities authorities could require companies to set up an electronic voting system for shareholders to exercise their right to vote.

The Ministry of Economic Affairs said in its proposal that the revision would solve the problem of shareholders of different companies being unable to attend all shareholder meetings because they are held at the same time.

Shareholders could file lawsuits demanding that the court revoke resolutions passed in a shareholders’ meeting if the company fails to comply with the amendment.

The amendment stipulates that shareholders shall have cumulative voting rights, instead of straight voting, for board candidates, which would allow minority shareholders to concentrate all of their voting strength on one or more individuals.

The proposed amendment also states that a company that does not suffer losses can opt to distribute a portion or all of its legal reserves and capital surplus to its shareholders in the form of cash or stock dividends.

Current regulations only provide for the distribution of stock dividends. That is, companies can only distribute up to 90 percent of earnings as dividends to shareholders and have to put aside 10 percent of the earnings as legal reserves. Companies can pay dividends from their capital surplus, but the payout cannot exceed 10 percent of their paid-in capital.

The revision would give companies more flexibility in managing their dividend policy and attract more investors, the ministry said.

The Cabinet also approved an amendment to the Value-added and Non-value-added Business Tax Act (加值型與非加值型營業稅法), which expanded the scope of offset for sales taxes imposed on transactions in goods and services between tax zones and bonded areas.

Under the current regulations, businesses are exempted from sales tax only on transactions for machines and equipment, fuel materials, raw materials and semi-finished goods between taxed zones and bonded areas or among bonded areas.

The seven types of bonded areas are science parks, export processing areas, logistic centers, agriculture technology parks, free trade zones, bonded warehouses and bonded factories.

The amendment stipulates that store owners would be fined between NT$1,500 (US$45.75) and NT$15,000 if they fail to include a 5 percent sales tax.

The amendment also proposes cutting the sales tax on local securities firms’ purchases of financial products from foreign securities companies to 2 percent, from the current 5 percent, to bring the tax rate in line with global markets.

In related news, Minister of Finance Lee Sush-der (李述德) yesterday presented the Cabinet with a proposal to give the government greater flexibility in the use of state-owned funds to facilitate national construction projects.

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