Newsletter
COMPANY ACT AMENDED TO FACILITATE REORGANIZATION
On January 13, 2006, the Legislative Yuan passed the proposed amendment to certain pro-visions under the Company Act to facilitate corporate reorganization. Its key points are as follows:
The preemptive right of shareholders and employees to subscribe for new shares no longer apply to new share issuances in con-nection with reorganization. Therefore, when a company issues new shares according to a reorganization plan, it does not need to inquire whether the employees and original share-holders would exercise such preemptive rights, and instead, can seek other subscribers, as proposed in the reorganization plan. Such amendment is aimed to provide an incentive for the company's creditors and investors to invest in the company and thus facilitate the reorganization.
In case that there are two or more reorganiza-tion supervisors, all matters should be decided by a majority vote of such reorganization su-pervisors.
The reorganizers must meet the requirements set forth in Article 30 of the Company Act. Article 30 of the Company Act provides that a reorganizer shall NOT:
1.have committed an offence as specified in the Statute for Prevention of Organiza-tional Crimes and subsequently adjudi-cated guilty by a final judgment, and the time elapsed after he/she has served the full term of the sentence is less than five years;
2.have committed an offence of fraud, breach of trust or embezzlement and sub-sequently punished with imprisonment for a term of more than one year, and the time elapsed after he/she has served the full term of such sentence is less than two years;
3.have been adjudicated guilty by a final judgment for misappropriating public funds during the time of his/her public service, and the time elapsed after he/she has served the full term of such sentence is less than two years;
4.have been adjudicated bankrupt, and not yet reinstated to his/her rights;
5.have been dishonored for unlawful use of credit instruments, and the term of such sanction has not expired yet; or
6.have no or only limited legal capability. Therefore, in addition to the professional capability, the reorganizer must posses integrity as well.
A photocopy of the court's decision of the re-organization should be posted where the company posts public announcements.
The resolution approving the reorganization plan can be adopted by a simple majority. Before the amendment, a resolution to ap-prove the reorganization plan should be adopted by two-thirds or more of the total votes of each group of interested parties.
The court may render a judgment to terminate the reorganization if the meeting of interested parties fails to approve the reorganization plan within one year following the date when (i) the company receives the court's decision on the reorganization, or (ii) the company receives the court judgment ordering the company to review again the reorganization plan.
This is to prompt the meeting of interested par-ties to produce a feasible reorganization plan as soon as possible, and to forestall the damage to interested parties, resulting from the uncertainty of the company's reorganization status and the legal relationship among the parties.