Newsletter
COMPANY ACT AMENDED TO FACILITATE FINANCIAL ASSIS-TANCE PROGRAM
In view of the current global financial crisis, in order to restore market confidence and stabilize financial markets, the ROC government intends to make available to Taiwanese enterprises a special financial assistance program, similar to the financial rescue package recently announced by the US federal government. Because the various assistance funds disbursed by the ROC government to enterprises will ultimately, in the broad sense, impose a shared burden on the entire nation, it is necessary to establish monitoring and regulatory mechanisms. To this end, amendment to the Company Act have been enacted. The amendments fall mainly into three areas:
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When a company avails itself of
a government special assistance program, it should put forward a self-help plan.
If the assistance funds to be provided
amount to NT$1 billion or more, the competent authority and the company receiving
assistance should together report on the company's self-help plan to the Legislative
Yuan.
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When a company avails itself of
a special assistance program, the remuneration of its managers will be subject to
a statutory cap to be set by the competent authority, in order to prevent the unfair
situation whereby managers continue to receive high remuneration when their company
is performing badly. By the same token,
the law requires that directors' remuneration should be determined in accordance
with a company's articles of incorporation and with resolutions of its shareholders'
meetings, and may not be set retrospectively. However,
in consideration of the fact that the shareholding structure of Taiwanese companies
is relatively concentrated, the Company Act has been amended to expressly provide
that when a company avails itself of a special assistance program, the remuneration
of its directors and supervisors should also be subject to a statutory cap to be
set by the competent authority.
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| | Based on the regulatory approach underlying the US financial assistance package, when a company avails itself of a special assistance program, the government is permitted to receive shares newly issued by the assisted company as consideration for the financial assistance, and the share issuance procedure is not subject to those restrictions on the issuance of new shares under the Company Act. This measure is intended to allow all Taiwanese taxpayers to share in the future profits of assisted enterprises after such enterprises successfully emerge from their difficulties. According to the Ministry of Economic Affairs' current proposals, in order to improve an assisted company's financial structure, the company should first reduce its capital and then increase it again in accordance with the Company Act, with the government becoming a shareholder of preferred shares after the increase in capital. |
To prevent the outflow of funds, when the Legislative Yuan passed the Company Act amendments, it attached a supplementary resolution requiring that for the duration of the period when a company is receiving assistance under a special assistance program, it may not invest overseas.