The FSC stands consistent position which dedicated to protecting the interests of shareholders and maintaining the order of the capital market for ownership disputes over listed companies. Moreover, shareholders who invest legitimately shall have equal and fair opportunities to exercise shareholders'' rights which is the basic norm for rule of law. The incident occurred at the Annual General Meeting (“AGM”) held by TATUNG CO.(“Tatung”, code: 2371) on June 30, 2020 wherein Tatung withheld the ballots for motions and ballots for elections from certain shareholders whose voting shares were arbitrarily denied, which infringed shareholders’ interests .It is considered in violation of corporate governance and shareholder activism. The FSC strongly condemns such behaviors which seriously breached corporate governance and has applied administrative sanctions as applicable under the law. In addition, the FSC will actively promote regulatory remedial plan to further reinforce corporate governance and strengthen investor protection.

I.To protect shareholders’ interests, maintain market order and clarify disputes, the FSC, as well as other peripheral regulatory entities, have taken the following administrative measures against Tatung and the people involved in the case:

(I)After conducting investigations, the FSC found the fact that Tatung arbitrarily denied certain shareholders of their voting rights is in fulfillment of provisions stipulated under Article 171, Paragraph 1, Subparagraph 3 of the “Securities and Exchange Act” in terms of offences relating to breach of trust. The case has been reported to the authorities concerned by the FSC and is now under prosecution and investigation. 

(II)The Taiwan Depository and Clearing Corporation (TDCC) conducted investigations and found that the company withheld ballots for motions and ballots for elections at shareholders’ and solicitors’ registration, which violated relevant regulations in governing the administration of shareholder services. The FSC sent an official notification to Tatung to state its position on July 2, and could impose sanctions, which include banning Tatung from conducting its own shareholder services, based upon Tatung''s response and the investigation results.

(III)The Securities and Futures Investors Protection Center (SFIPC) held an extraordinary board meeting on Jul 6, 2020 and adopted the resolution to initiate legal action in the courts to dismiss the Tatung Chairwoman as a director of the board in view of the illegal incidents occurring at its AGM which were found to have met Article 10-1 of the “Securities Investor and Futures Trader Protection Act”. The SFIPC has filed the complaint for civil litigation in order to maintain market order and to rectify irregularities in corporate governance.

(IV) Taiwan Stock Exchange (TWSE) requested Tatung to hold a press conference at the TWSE media room to clarify the disputes at its AGM. Tatung’s failure to give convincing reasons and provide relevant evidence to justify its behaviors against shareholders rights is found to have met Article 49, Paragraph 1, Sub paragraph 14 of the “Operating Rules of the Taiwan Stock Exchange Corporation”. Thus, the TWSE announced that listed securities of Tatung are being categorized as altered trading method (full-delivery shares) starting from July 2, 2020. In addition, the TWSE has implemented such measures to monitor the Tatung Co. Group, including listed into the Key Financial Section in Market Observation Post System, monthly disclosure of its high liquidity assets, short-term loans and long-term liabilities due within one year, and more. Furthermore, the TWSE will request Tatung with timely and complete disclosure of its material information, and examine Tatung’s internal control for lending funds to others, providing endorsements or guarantees for others and major asset transactions, as well as review Tatung’s internal control procedures for conducting its own shareholder services and convening the shareholders'' meetings. The TWSE will dispatch their respective personnel to inspect upon demand. 

II.Regarding the Ministry of Economic Affairs’ ("MOEA") inquiry concerning Tatung''s amendment registration application for change of directors, the FSC responded on July 7 mainly based on the fact that Tatung did not have the right to deny the shareholders'' voting rights and this had seriously disrupted the order of the capital market and breached corporate governance. Accordingly, MOEA announced on July 9 that it dismissed Tatung''s amendment registration application for change of directors.

III.Regulatory Remedial Plan

(I)The FSC has mandated the TWSE and other peripheral regulatory entities to examine existing regulations and propose remedial measures to enhance the protection of shareholders’ interests and that of corporate governance. For example, the TWSE would consider additional rules that any responsible person of a company who violates the principles of corporate governance may not serve as responsible persons of those companies applying for initial public offering. In addition, the FSC will mandate the TWSE and SFIPC to gather scholars, experts and designated institutions to jointly propose comprehensively regulatory remedial reform measures. The FSC will actively work on the feasible proposals.

(II)The Corporate Governance Roadmap 3.0 may include the following aspects: the TDCC will consider supervisory measures on reviewing the qualifications for companies conducting their own shareholder services and improve the transparency of information disclosure for electronic voting in order to fulfill the shareholder activism. In addition, measures will be undertaken to reinforce legal compliance for the board of directors in order to protect the rights and interests of shareholders.

 

Contact Unit: Securities Trading Division of the Securities and Futures Bureau

Telephone: 02-2774-7167

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