Newsletter
SHARE PAYMENT REFUNDS FOR REDUCTION IN CAPITAL IS NOT LIMITED TO CASH
In an interpretation issued on 29 January 2008, the Department of Commerce of the Ministry of Economic Affairs (MOEA) stated that as the Company Act does not provide a clear mechanism for companies to refund capital contribution in kind other than cash, in order to protect shareholders' interests and reduce potential disputes, non-cash refund would require a resolution adopted by the shareholders, an audit conducted by a certified public accountant (CPA) and the consent of the shareholders receiving such non-cash refund.
It follows from the interpretation that a company is not prohibited from refunding shareholders' capital contribution in kind when reducing its capital; however, the property substituting for cash payment and the number of shares that the property represents must be determined by the resolution of a shareholders' meeting and agreed upon by the shareholder receiving the property. Prior to the relevant shareholders' meeting, the board of directors should submit to a CPA the valuation of the property and the number of shares that the property represents for audit and certification. The MOEA also stressed that a CPA who produces a misleading audit report or the responsible person of a company who engages in embezzlement of the company's assets will be liable for such acts.