Negotiations over the sale of the Next Media Group’s assets in Taiwan have been causing a stir for some time now, as the deal has considerable implications for freedom of the press, which is an important element in a constitutional democracy.
As the seller and buyers prepare to sign the deal, the Financial Supervisory Commission (FSC) is drawing attention to the principle that major shareholders in financial holding companies are not allowed to have control of non-financial companies as well — a well-known aspect of financial law and regulations.
The main purpose of this principle is to prevent the kind of malignant “cross-management” that has cost society much in the past. Legal clauses enshrining this principle include Articles 16 and 37 of the Financial Holding Company Act (金融控股公司法) and Articles 139-1, 146 and 146-1 of the Insurance Act (保險法). Both these laws provide double layers of regulation: the first being limits on investment in other kinds of business by financial holding and insurance firms, and the second being upper limits to individuals’ stakes in financial holding and insurance companies, along with standards for investigating the eligibility of major shareholders.
For the sake of maintaining normal operations of productive businesses, the newly amended Article 146-1 of the Insurance Act stipulates that insurance companies’ scope for getting involved in the running of other kinds of businesses should be strictly limited.
The first level of regulation is outlined in the act as follows: “It is prohibited for any of the following circumstances to obtain with respect to an investment made by an insurance enterprise in accordance with paragraph 1, subparagraph 3: 1. For the insurance enterprise or a representative thereof to be a director or supervisor of the investee company. 2. For the insurance enterprise to exercise voting rights in support of a related party, or a director, supervisor, or employee of a related party becoming a director or supervisor of the investee financial institution. 3. For a person dispatched by the insurance enterprise to be hired as a manager of the investee company.”
As for major shareholders in investment companies who invest in media businesses, even if they do so through equity funds, they should still be investigated to determine whether this affects their eligibility to become major shareholders in media firms.
This is a lesson that should have been learned from the China Rebar asset-stripping scandal and it is the main point of the second level of regulation.
Want Want China Times Group chairman Tsai Eng-meng (蔡衍明) and his family have an effective 65 percent controlling interest in the Union Insurance Co, yet he is about to take over ownership of Next Media in Taiwan. However, the FSC, which is the competent authority for the Insurance Act, though drawing attention to the law, has not implemented it. This would require investigating Tsai’s eligibility to become a major shareholder based on the principle of separation of interests in financial holding and non-financial companies. The commission’s failure to investigate this is bewildering.
It could be that the government’s talk of fostering the healthy development of the media industry is empty rhetoric and that the authorities prefer to pick and choose which laws they are going to implement at what time. Whatever the case may be, civil society should reject the kind of media bosses who would be welcomed in China, where the government rules by stifling the freedom to report the news, because such bosses are the greatest foes of constitutional democracy and freedom of the press.
Liu Ching-yi is a professor in National Taiwan University’s Graduate Institute of National Development and Graduate Institute of Journalism.
Translated by Julian Clegg