The Taipei District Court yesterday ruled in favor of Taishin Financial Holding Co (台新金控) over state-run Chang Hwa Bank (CHB) in a decade-long management rights dispute, but rejected its plea for compensation and a board reshuffle.
The ruling lent support to the Taishin Financial’s permanent claim for majority control in CHB’s boardroom, in line with a 2005 agreement with the Ministry of Finance after a share sale that made Taishin the largest shareholder in the bank with a 22.5 percent stake.
The ministry, CHB’s second-largest shareholder with 20 percent, had insisted the agreement was no longer binding after 2005. The court disagreed, saying the contract remains valid and the ministry must not obstruct Taishin from winning a majority of CHB board seats.
Photo: Liu Hsin-de, Taipei Times
However, the judges refused to approve Taishin’s claim for NT$16.5 billion (US$510.13 million) in damages on the grounds the ministry is not responsible for the company’s failure to win majority control in the 2014 board election.
Taishin wrote off NT$14.78 billion in asset losses because it could no longer count CHB as a subsidiary after losing control of the bank’s board.
“The verdict should allow Taishin to reclaim management rights in the next board elections, scheduled for June next year,” the conglomerate said in a statement.
The ministry must not engage in moves that would violate the interests of Taishin and its shareholders, it said. “The company will carefully read the verdict and come up with the best solutions to guarantee its rights and interest.”
Minister of Finance Chang Sheng-ford (張盛和) said he would now pass the controversy on to his successor.
The Ministry of Finance said the verdict had “lifted” the blame from it for the long-running dispute because it needs to pay just 12.5 percent of the litigation costs while Taishin has to pay the remainder.
Taishin bought the stake in CHB for NT$36.57 billion to bail out the then debt-ridden lender, with a view to acquiring it. It ran into political opposition because lawmakers and other critics suspect tradeoffs were behind the deal.
The conglomerate then alienated the ministry in early 2014 by unilaterally seeking to increase CHB’s capitalization, which would have diluted the ministry’s stake. The plan later fell through.
Taishin complained that the ministry had solicited endorsement letters to sway the board election results in what it said was a violation of the 2005 agreement.
CHB shareholders voted for ministry-backed candidates in the election, after which Taishin shut down negotiations and sought recourse through the courts.
CHB put up a better earnings performance under existing management as evidenced by an 11.69 percent increase in revenues last year, the ministry said, adding that it would seek legal advice to protect its stake.
CHB issued a statement later in the day saying that the ruling would not affect its current board lineup.
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