The government yesterday won a majority of seats in Chang Hwa Bank’s (CHB, 彰銀) board election, a result that might raise legal disputes over a 2005 agreement to help Taishin Financial Holding Co (台新金控) gain control of the CHB boardroom.
The Ministry of Finance, the second-largest shareholder in CHB with a 20 percent stake, won four director seats and two independent director seats in the nine-member boardroom, leaving Taishin Financial with two director seats and one independent director seat.
The results came after a special CHB shareholders’ meeting that lasted for seven hours due to a record-high attendance and long lines of speeches by shareholders.
Taishin Financial, which has controlled 22.5 percent of shares in CHB since 2005, might no longer be able to count CHB as a subsidiary or appoint its chairperson. Moreover, it might have to recognize NT$14 billion (US$450 million) worth of asset losses, wiping out profit valued at NT$12.9 billion for the first three quarters of this year.
The bank-focused conglomerate bought the stake in 2005 for NT$36.57 billion (US$1.17 billion) to help bail out the then debt-ridden CHB, with a view to acquiring it a later date.
The plan has hit a snag as critics suspect an irregular tradeoff behind the deal.
Vice Minister of Finance Wu Tang-chieh (吳當傑) last night said the ministry would respect the decision of CHB shareholders and that the ministry’s desire to pursue harmony with Taishin Financial remains unchanged.
“We will approach the personnel issue with care and find the best executive candidates to advance CHB interests,” Wu told reporters.
The ministry has met all legal requirements in dealing with CHB board elections, he said.
The ministry last month said it would be satisfied with two of the three independent director seats, but would accept the final outcome if shareholders decided to rally support behind the government.
CHB can better boost its assets, net worth and profitability if the ministry can effectively exercise checks and balances, Wu said.
The new CHB board is likely to meet today, at the earliest, to elect the new chairperson and president, CHB executive vice president James Shih (施建安) said.
The CHB workers’ union has also thrown its support behind the finance ministry, for fear Taishin Financial might revive the acquisition effort following a board victory and risk workers losing their jobs.
After CHB’s board re-election, Taishin Financial said that it would file a lawsuit against the ministry for the massive losses and damages it caused the company.
The financial holding company further accused the ministry of violating the agreement reached by both sides in 2005 to support the company’s bid to obtain a majority control of CHB, while intentionally manipulating CHB’s board re-election.
“We have never wanted to fight against the government … but to protect rights and interests of more than 200,000 shareholders of Taishin Financial, the only way is to seek legal remedy,” Taishin Financial president Joseph Jao (饒世湛) told a press conference.
Taishin Financial has commissioned two law firms to represent the financial holding company, aiming to file a civil lawsuit at the Taipei District Court in the near future, Jao added.
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