Newsletter
DIRECTORS' SHARE DISPOSALS AFTER PUBLIC FLOTATION MUST BE CALCULATED CU-MULATIVELY
If the nominee of a corporate shareholder of a non-public-issuing company is elected as a di-rector or supervisor of a company in accordance with Article 27 of the Company Law, and the corporate shareholder subsequently disposes of its entire shareholding, then the director or su-pervisor's qualification for office ceases to exist, and is automatically relieved of office.
The amended Company Law provides that a di-rector of a public-issuing company shall be automatically relieved of office upon disposal of more than half of the shareholdings that he held when elected. In an interpretation dated 6 May 2003, the Ministry of Economic Affairs stated that in the case of a non-public-issuing company that subsequently becomes a public issuer, the criterion for determining whether the above provision applies is whether the director dis-posed of any shares after the company made its first public issuance. If a director disposes of shares after the company made a public issuance, the quantity of shares disposed of should be calculated together with any shares disposed of before the public issuance, to determine whether the total shares disposed of exceed half of the shares the director held at the time of election, and therefore whether the director should be automatically relieved of office. Conversely, if a director does not dispose of any shares after the company's public issuance, the automatic relief from office will not apply, even if he disposed of more than the statutory limit during the period while the company was still a non-public-issuing company.