Taipei, Taiwan has completed the largest revamp on the Company Act in 17 years in an attempt to boost corporate governance, ease rules on fundraising, and strengthen the anti-money laundering mechanism in the country.
The Legislative Yuan passed amendments to the Company Act on Friday, approving the largest revision to the act since 2001. The approval came after three years of efforts to revamp the Company Act, which took effect for the first time in July 1931.
Among the approved amendments, Article 173-1 stipulates that shareholders who own a more than 50 percent stake in a company for no less than three months are eligible to convene a special general meeting, a move which some in the business sector said will take on the grip held by long-serving board members in a company.
But others think such a provision could trigger a fight over the proprietary rights of a company. They said the threshold of no less than three months for stake holdings is too short a period of time, so there are fears that the proprietary rights of a company could become unstable due to possible internal fighting for control of the company.
Meanwhile, some market analysts also raised concerns that such a threshold could pave the way for Chinese investors, who are sitting on plenty of funds, to raise their holdings and control Taiwanese companies.
Despite the approval of Article 173-1, lawmakers did not issue the green light to abolish the position of board directors assigned by corporate shareholders and decided to not pass an amendment to request a company to install corporate governance specialists.
The Financial Supervisory Commission, the top financial regulator in Taiwan, said it will use its executive monitoring power to make up the void resulting from the botched amendments.
One amendment that did pass, Article 9, stipulates that as long as the owner, proxy or an employee of a company is convicted for breaching the Criminal Law by providing falsified information, the Ministry of Economic Affairs (MOEA) may revoke its registration or stakeholders may apply with the MOEA to do the same.
The amendment has been dubbed the "Sogo clause" involving Far Eastern Group Chairman Douglas Hsu (???), who has been embroiled in a shareholder rights dispute for more than 10 years over a controversial acquisition of the shares and proprietary rights in what was formerly Pacific Sogo Department Stores and is now called Far Eastern Sogo.
On Friday, lawmakers also approved an amendment to add a clause, Article 22-1, which has been called an anti-money laundering clause. It stipulates that board directors, supervisors and managers, as well as shareholders with at least a 10 percent stake in a company need to declare their involvement in the company.
In case of any changes in their shareholding, they also must declare the adjustments within 15 days, the passed amendment showed.
First-time violators of Article 22-1 will be subject to a fine ranging between NT$50,000 (US$1,639) and NT$500,000 if they fail to fulfill their obligations in a certain period of time imposed by the MOEA.
If they continue to ignore the MOEA's requirement, the fine will increase and the most serious penalty will be that they may face a revocation of their company's registration.
The amendment was designed to help Taiwan ahead of an evaluation by the Asia/Pacific Group on Money Laundering (APG) in November. The revamp of the Company Act has been perceived as a critical factor to the APG assessment.
Source: Focus Taiwan News Channel