The Taiwan High Court yesterday lent support to the validity of a 2005 agreement that required the Ministry of Finance to help Taishin Financial Holding Co (台新金) win majority control of the board of state-run Chang Hwa Commercial Bank (CHB, 彰銀).
However, the ruling failed to put an end to the decade-long management rights dispute, as the ministry vowed to file an appeal and asked shareholders to rally behind government-backed candidates in a board election next month.
Taishin Financial welcomed the court’s decision and urged Premier Lin Chuan (林全) to intervene and help “deliver justice.”
“The contractual obligation exists as long as Taishin Financial remains the largest shareholder in CHB,” the court said in the ruling.
The ministry, which in 2005 sold a 22.5 percent stake in then-financially strained CHB to Taishin Financial for NT$36.5 billion (US$1.21 billion at the current exchange rate), should help the buyer win five of the nine board seats, the ruling said.
The ministry said it regretted the verdict, adding that it is no longer in a position to sway the election outcome because CHB’s capital structure has changed substantially.
Lung Yen Life Service Corp (龍巖集團), the nation’s top cemetery and funeral-service operator, has become the third-largest CHB shareholder with a 3.9 percent stake and has its eye on two board seats after aligning with the ministry.
CHB is to elect six board directors and three independent directors on June 16.
“The ruling fails to meet the principle of proportion now that the pan-government camp controls a larger stake than Taishin Financial does,” the ministry said in a lengthy protest.
The camp has nominated eight candidates.
No contract should last forever and the ministry had fulfilled its obligations by yielding management rights in CHB to Taishin Financial from 2005 through late 2014, when shareholders voted in favor of government-backed board candidates.
CHB’s finances have improved over the past three years and shareholders should support candidates who can better protect their interests, the ministry said.
Taishin Financial has riled the ministry with surprise attempts to acquire CHB and dilute the government’s holdings.
Taishin Financial called on the ministry and state funds to show respect for the ruling and quit buying authorization letters to thwart its efforts to regain control of CHB.
The ruling reaffirms the contractual relationship and the ministry should quit litigation and join forces with Taishin Financial to advance the interests of all shareholders, the company said.
The bank-focused conglomerate asked the premier — who oversaw the 2005 agreement as the then-minister of finance — to take action and rein in what it called unruly government-controlled stakes.
“It is time that the premier acted to remedy the mess after previously staying on the sidelines to avoid tilting the court’s decision,” Taishin Financial said.
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