Sat, Jul 07, 2018 - Page 1 News List

Corporate governance reforms passed

FAILING GRADE:NPP Executive Chairman Huang Kuo-chang said that an amendment to Article 22 was too lax and would result in Taiwan again ‘flunking’ an APG evaluation

By Sean Lin  /  Staff reporter

Legislative Speaker Su Jia-chyuan bangs his gavel to mark the passage of amendments to the Company Act following a third reading at the Legislative Yuan in Taipei yesterday.

Photo: CNA

The Legislative Yuan yesterday passed amendments to the Company Act (公司法) aimed at improving corporate governance and salvaging the nation’s score in a year-end Asia/Pacific Group on Money Laundering (APG) evaluation.

An amendment to Article 9 stipulates that if the owner, proxy or an employee of a company is convicted for breaching the Criminal Code by providing falsified information, stakeholders may apply with the Ministry of Economic Affairs to revoke the company’s registration.

However, firms that registered false information, but corrected it before a court ruling is issued would not see their registration revoked, the amendment says.

That means the act, dubbed the “Sogo clause,” would not retroactively apply to Far Eastern Group (遠東集團) chairman Douglas Hsu (徐旭東), who has been embroiled in a shareholder rights dispute for more than a decade with former Pacific Distribution Investment Co (太平洋流通) chairman Lee Heng-lung (李恆隆) over Hsu’s controversial acquisition of the shares and proprietary rights to what was formerly Pacific Sogo Department Stores Co (太平洋崇光百貨).

The amendment was passed with the support of the Democratic Progressive Party (DPP) and the Chinese Nationalist Party (KMT) caucuses, which proposed identical drafts.

New Power Party (NPP) Executive Chairman Huang Kuo-chang (黃國昌) criticized the amendment, saying that it not being retroactive contradicts parts of the Criminal Code that address forgery and that it failed to include civil servants who allow the registration of a company with false data as offenders.

He also slammed an amendment to Article 22, dubbed the anti-money laundering clause, which stipulates that — aside from directors, supervisors and manager — only shareholders with an at least 10 percent stake need to declare their involvement to the ministry.

The amendment is too lax, as it targets only some shareholders, which would result in Taiwan again “flunking” the year-end evaluation, Huang said.

The KMT and DPP voted down an NPP draft amendment that would bar companies from hiring nominee directors, as the private sector has voiced concern that such a rule would deter investment by foreign companies that have seats in local companies’ boards of directors.

While some of their members submitted motions to abolish nominee directors, the DPP and KMT caucuses said that as about 27,000 local firms have such personnel, abolishing the system would cause widespread negative effects for local industries.

A proposed addendum, draft article 173-1, which aims to grant majority shareholders the right to call extraordinary shareholders’ meetings, was passed by the DPP caucus, which controls a legislative majority, amid concerns that the legislation would prompt struggles over the proprietary rights of companies.

An amendment to Article 214 would lower the ownership threshold from 3 percent to 1 percent for a shareholder to request that a supervisor file a lawsuit against a director on behalf of the company.

An amendment to Article 372 stipulates that foreign companies that plan to establish a branch office in Taiwan must create a dedicated fund and appoint a head for the office.

Branch leaders who allow the foreign company’s headquarters to reclaim the fund after the office’s capital is registered would face a maximum prison term of five years, a fine of up to NT$2.5 million (US$81,967), or both, it says.

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