Newsletter
REMOVAL FROM OFFICE PRO-VISIONS APPLY TO ENTRUST-MENT OF DIRECTORS' SHARES
In an interpretation dated 11 March 2003, the Securities and Futures Commission stated that if a director or supervisor of a public company places his shares in the company into a trust, but withholds the right to direct the use of the shares, such shares can still be counted toward the minimum total registered shareholdings of all directors or supervisors as required under Article 26 of the Securities and Exchange Act.
In a further interpretation dated 16 September 2003, the SFC stated that there was no conflict between the above interpretation, which was intended to regulate the overall proportions of shares held by directors and supervisors, and the interpretation issued by the Ministry of Eco-nomic Affairs (MOEA) on 16 April 1998, which stated that the criterion for determining whether automatic removal from office would occur un-der Article 197 Paragraph 1 of the Company Act was whether or not the ownership of the shares had been transferred.
In other words, although shares placed in a trust still count toward the total registered sharehold-ings of directors or supervisors under Article 26 of the SEA, when shares are placed into trust the name recorded in the shareholders' roster is changed to that of the trustee, and ownership is transferred. Therefore, as stated in the MOEA's interpretation, if the number of shares entrusted by a director or supervisor of a public company exceeds half the total number held at the time of appointment, the provisions of Article 197 Paragraph 1 of the Company Act requiring automatic removal from office will still apply.