An amendment to the Company Act (公司法) that passed its third reading in the Legislative Yuan yesterday has raised concern among business groups that companies might see an increase in proxy fights.
An amendment to Article 173-1 of the act — which allows shareholders controlling at least half of a company’s shares to call special shareholders’ meetings — is likely to trigger more proxy fights, Chinese National Association of Industry and Commerce (工商協進會) chairman Lin Por-fong (林伯豐) said.
While the amendment stipulates that only shareholders who have held shares for more than three months are allowed to call special shareholders’ meetings, the revision might hurt corporate governance, as the three-month period is too short, the Chinese-language Apple Daily quoted Lin as saying.
General Chamber of Commerce of the ROC (全國商業總會) chairman Lai Cheng-yi (賴正鎰) provided a similar view, saying that the amendment might “open the gate” for China-backed activist investors who aim to replace boards of directors at such meetings.
The revised article is also known as the “Tatung clause,” in reference to a series of disputes between activist investors and home appliance maker Tatung Co’s (大同) founding Lin (林) family regarding the company’s business performance, governance and future development.
Over the years, activist investors have tried to gain approval from Tatung’s board of directors to hold special shareholders’ meetings to address the issues, but to no avail.
The Ministry of Economic Affairs yesterday did not directly respond to the business groups’ concerns.
However, Vice Minister of Economic Affairs Wang Mei-hua (王美花) said that the ministry would need to consult further with the Financial Supervisory Commission (FSC), because Article 43-5 of the Securities and Exchange Act (證券交易法) requires shareholders controlling at least half of a listed company’s shares to obtain approval from the board to call special meetings.
It is unclear which law listed companies should follow and the ministry would meet with the FSC to clarify the issue, she said.
As for the fear that China-backed investors could ambush firms, Wang said that a review process for China-related investments is already in place and the ministry would consider complementary measures.
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