Taiwan Imposes New Disclosure Requirement on Company Shareholder Information
The situation: On November 1, 2018, the amendments to the Taiwan Company Act (âTCAâ) passed by the Taiwanese legislature on July 6, 2018 came into force.
The result: While some regulations have been relaxed and business flexibility increased, the TCA changes also impose a new reporting obligation on companies regarding insider information to improve transparency and corporate governance.
Looking forward: The newly implemented reporting requirement is that a Taiwanese company (including private companies) periodically submit a report on the stock ownership statuses and other information of its directors, supervisors, officers and shareholders with more than 10 percent of its actions on the website designated by the competent authority. The first of these reports is expected on January 31, 2019.
Taiwan’s legislature passed a series of amendments to the ATT on July 6, 2018, with these changes coming into effect on November 1, 2018. These changes are part of a major overhaul of the ATT to improve the competitiveness of the business environment Taiwan and aim to: (i) increase the flexibility of business operations; (ii) improve the transparency of companies; (iii) create a more user-friendly environment for startups and entrepreneurship; (iv) strengthen corporate governance; (v) strengthen the protection of shareholders; and (vi) conform to international trends. Some of the key changes applicable to limited liability companies (i.e. corporations) are discussed below, and these changes will affect foreign investors who have investments in Taiwan.
Increase flexibility in business operations
The new TCA changes allow a private company to have only one or two directors, instead of requiring a board of directors with at least three directors. Prior to the TCA amendments, a private company had to establish a board of directors consisting of at least three directors. To extend the autonomy of the company, a private company can now choose not to constitute a board of directors but to elect one or two directors, if its statutes so provide. If a company elects only one director, that director will be its chairman and not all provisions relating to boards of directors are applicable to that company.
Private companies made up of a shareholder legal entity are authorized not to have a supervisor. Provided that there are no other shareholders to protect in a company made up of a single shareholder company, the amended TCA now allows such a company not to set up a controller.
Under the new amendments, a board of directors of a private company is allowed to pass written resolutions. As long as the company’s articles of association allow it, its board of directors may unanimously resolve questions of the board of directors in writing without actually holding a meeting of the board of directors.
The new changes also allow a private company to convene a general meeting by videoconference, if its articles of association expressly provide for it. In this case, a company can freely settle questions relating to the registration and confirmation of the identity of shareholders at a meeting.
To better implement anti-money laundering efforts, a company is now required to submit an annual shareholding report indicating the articles of association of directors, supervisors, officers and shareholders holding more than 10 percent of its shares. .
Improve the transparency of the company
To better implement anti-money laundering efforts, a company is now required to submit an annual shareholding report indicating the articles of association of directors, supervisors, officers and shareholders holding more than 10 percent of its shares. . The first submission must be made before January 31, 2019. In addition, if there is a change in the shareholder status of any of the aforementioned persons, a company is required to report this change within 15 days.
Create a more friendly environment for startups and entrepreneurship
Previously, a company could only distribute dividends once a year after ratification by shareholders at the annual general meeting. In order to better incentivize shareholders to invest, the amended TCA now allows a company to distribute dividends quarterly or semi-annually, provided estimated taxes, estimated compensation and legal reserve have been set aside. For cash dividend distributions during the first three quarters or the first half of the year, a resolution passed by the board of directors will suffice, rather than needing a resolution from the shareholders.
In addition, under the new changes, a company can now choose to issue shares with or without par value.
The updated TCA also allows a private company to issue multiple classes of preferred shares, each with variations on voting rights, veto rights or restrictions on being elected as a director or supervisor, as well. as the rights of certain seats to be elected as directors or restrictions on the transfer of shares.
THREE MAIN TO TAKE AWAY
- Amendments to the TCA aimed at improving the competitiveness of Taiwan’s business environment, passed by the Taiwanese legislature on July 6, 2018, entered into force on November 1, 2018.
- Typically, the ATT changes were aimed at increasing the flexibility of business operations, improving business transparency, creating a more user-friendly environment for startups and entrepreneurship, strengthening corporate governance, improving protection of shareholders and to comply with international trends.
- Other requirements imposed by the changes to the TCA include a new reporting requirement for Taiwanese companies to report shareholder status and other information of their directors, supervisors, officers and shareholders who own more than 10 percent of its shares. owes its first submission by January 31, 2019.