To strengthen corporate governance and to address certain practical issues, the Taiwanese Companies Act was amended on December 14 2011, mostly triggered by legislators', rather than the administration's, initiative:
- Shadow directors and de facto directors of a public company are liable for civil, administrative and criminal liabilities to the same extent as directors. A shadow director or a de facto director is defined as a person who is not a director but in fact performs the duties of a director, or controls the personnel, finance or business operation of a company so as to direct the directors to perform their duties.
- Under the Companies Act, a responsible person of a company (for example, director or manager) bears fiduciary duty to the company. To strengthen the obligations and to avoid unjust enrichment, the amendment sets forth that any profit gained by the responsible person of a company or a third party as a result of the responsible person's breach of fiduciary duty will be disgorged by the company by way of a shareholders' resolution.
- The Companies Act allowed a corporate shareholder of a company to appoint many of its representatives to be simultaneously elected as directors and supervisors (internal auditors). Because the duty of a supervisor is to supervise the business operations conducted by directors, such appointment/election mechanism will comprise the function of a supervisor. The amendment imposes a restriction to the extent that such representatives can only be elected as directors or supervisor, but not both.
- The election of directors and supervisors should adopt the cumulative voting system. A company cannot opt out this system to adopt the straight voting system in order to protect the representation of minority shareholders in the composition of the board of directors or supervisors.
- A director should explain the content of conflict of interest for any agenda item discussed in the board meetings, and excuse himself from voting. Otherwise, the board resolution will be null and void.
Recent amendments to the Companies Act, including the latest one, have been made to materialise corporate governance principles, in particular the protection of minority shareholders' interest, in the statute book. These will certainly contribute to the healthy development of business operations in Taiwan.
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