Newsletter
A COMPANY MAY AMEND ITS CORPORATE REGISTRATIONS DESPITE ITS INSOLVENCY
According to the Company Act, when a company's assets are obviously insufficient to satisfy its liabilities, the board of directors should apply for declaration of bankruptcy. Based on previous interpretations by the MOEA, in order to protect transaction safety and interests of new creditors, companies are allowed to make capital increase registrations only when, as a result of the capital increase, the assets of the company will be no less than its liabilities. After the capital increase, in the event that the company's total amount of assets is still less than the total amount of liabilities, the company is still required to apply for bankruptcy declaration.
However, the MOEA changed its view by issuing a new interpretation on September 14, 2009. Pursuant to this new interpretation, the Company Act provision mentioned above is a rule related to directors' duties and also, under similar rules of the Civil Code, directors who are contributorily negligent should be held liable. As such, applications for corporate registrations are only subject to the review in form, rather than in substance. As long as the application for the amendment to the corporate registration is consistent with the Company Act and the Regulations Governing Company Registration and Regulation, the company should be allowed to amend its corporate registrations. Hence, bankruptcy declaration and corporate registration are matters of different nature.
Therefore, when a company applies for amendments to its corporate registration, even though the company's assets are obviously insufficient to satisfy its liabilities, its application for the corporate registration should be permitted as long as such application is in compliance with the Company Act and the Regulations Governing Company Registration and Regulation.