Newsletter
CLARIFICATIONS ON DIREC-TORS AND SUPERVISORS OF SINGLE-SHAREHOLDER COM-PANIES
In an interpretation dated 17 May 2002, the Ministry of Economic Affairs (MOEA) stated that when all the shares in a company are trans-ferred to a single corporate shareholder, even if all the existing directors and supervisors previ-ously elected as corporate representatives are to remain unchanged, the single corporate share-holder must still reappoint them in accordance with Article 128-1 of the Company Law. By requiring the early removal from office of ex-isting directors and supervisors, this interpreta-tion creates considerable disadvantages for cor-porate shareholders.
Subsequently, facing criticisms from many quarters, on 16 August 2002 the MOEA issued a further interpretation that where a company lim-ited by shares becomes a single-shareholder company by the transfer of shares to a single corporate shareholder, and the original directors and supervisors are all to be directly appointed by that corporate shareholder, in the interests of stability of their terms of office, the directors and supervisors appointed by the corporate share-holder before conversion may remain in office for the remainder of their previous terms, in or-der to resolve the controversy caused by the pervious interpretation.
However, the MOEA reiterated that if a com-pany has multiple shareholders, its corporate shareholders may directly appoint representa-tives for election as directors and supervisors under Article 27 Paragraph 2 of the Company Law, and in accordance with their duties may replace them at any time for the remainder of their terms. However, in the case of a sin-gle-shareholder company its directors and su-pervisors should be directly appointed by the corporate shareholder in accordance with Article 128-1 of the Company Law, and are not elected by a shareholders' meeting. Therefore the basis in law for their holding office is different, and in principle they should be elected or appointed in accordance with the different provisions, ac-cording to the number of the company's share-holders.