Taiwan has launched ambitious, comprehensive reform of its corporate governance framework, one that wants to move effectively to modern governance.
In December 2018, the Yuan (national parliament) completed “what many consider to be the largest overhaul of its Company Act, which has been in force since 1931, in nearly 20 years. TMF Group writes in a note : “Important changes have been made in a focused effort to boost corporate governance .
Taiwan’s Corporate Governance Framework has been published in the Taiwan Stock Exchange, which publishes the Code: “Corporate Governance Principles for Best Practices for TWSE / TPex listed Companies.” Now there are several changes to the Company’s Act on governance topics, as well as a Roadmap that changes heralds to best practices in the country.
Legal Changes in Taiwan Corporate Governance
One amendment stipulates that more than 50 per cent of a company will be eligible for a special meeting and vote out. 9-year term, and to replace them with better-performing directors.
Another corporate governance-based amendment would be directors, managers and shareholders of a company who hold more than 10 per cent of total equity must declare this to the FSC. This is an anti-money laundering measure, designed to help Taiwan by the Asia / Pacific Group on Money Laundering in November.
Still another amendment allows a private company to have one or two directors, instead of three. The measure is intended to expand enterprise autonomy: A private company may now choose not to sit on the board of directors but elect one or two directors. If a company elects only one director, this director will serve as the chairman, and all provisions relating to boards of directors are not applicable to such company. A private company may choose to stop holding board meetings and make all decisions via written resolutions.
The Corporate Governance Roadmap , the Financial Supervision Commission (FSC), calling for the deepening corporate governance culture, enhancing board transparency, encouraging participation of external shareholders, and augmenting regulatory enforcement – thus aimed squarely at Modern Governance.
“The ultimate goal is to promote an investment-friendly environment and improve international competitiveness,” the FSC explains.
Roadmap calls for Voluntary Action to build a Modern Governance Culture
The government is using both the carrot and the stick in corporate governance reform.
First, the government is about to change in governance frameworks at Taiwan – that is the stick. But the carrot of action at the companies themselves: “Meanwhile, the government therefore aims to have corporate governance culture rooted at companies,” the roadmap says.
Taiwanese companies with modern governance, consisting of five parts:
- Deepening corporate governance and CSR culture. The CG 100 index and Taiwan ESG index.
- Increasing compliance. This means strengthening the board of directors, expanding the establishment of audit committees, integrating corporate governance professionals and discouraging.
- Promoting shareholder activism : Companies facilitating external shareholders’ participation in corporate governance by incentivising the attendance of institutional investors at meeting of shareholders and adopting a system for board candidate nominations.
- Strengthening disclosure and transparency : Companies should disclose information in English as much as possible; information should deliver punctual, and both financial and non-financial disclosures should be of high quality.
- Augmenting regulatory enforcement : The Securities and Exchange Act seeks to authorize sharper penalties for non-compliance.
“Overall, these amendments do enhance shareholder protections, increase flexibility in business operations, enhance corporate transparency, strengthen corporate governance and create a more friendly environment for start-ups and entrepreneurship,” commented Lawyers at the Taiwan office of Jones Day.
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