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Important Measures

Important Measure August 2022

2022-11-28
1.Amendment to Articles 3, 7 and 19 of the Regulations Governing Procedure for Board of Directors Meetings of Public Companies (2022/8/5)
To clarify the procedures required to discharge a board chairman and to reinforce the spirit of corporate governance, the Financial Supervisory Commission (FSC) issued an amendment to the above Regulations on 5 August 2022. Key points of the amendment are as follows:
(1)Important matters for deliberation by the board of directors may not be raised by an extraordinary motion: Considering that before the board makes decisions on important matters affecting company operations, directors should be given ample information and time to evaluate the relevant proposals. The amendment therefore expressly requires that all important matters affecting company operations be specifically listed in the notice of the reasons for calling a board meeting; no such matter may be raised by an extraordinary motion, and exceptions to this on grounds of an emergency or legitimate reason are no longer allowed.
(2)The election or discharge of the chairman of the board of directors must be submitted for deliberation by the board of directors or the managing directors: The Company Act expressly provides that the chairman shall be elected by a resolution of the board of directors or the managing directors. Discharge of the chairman likewise should also require a resolution by the board of directors or the managing directors, whichever originally elected the chairman. Given that both the discharge and the election of the chairman are important matters of the company, the amendment expressly provides that the election or discharge of the chairman must be submitted for deliberation by the board of directors or the managing directors and may not be raised by an extraordinary motion on grounds of emergency or legitimate reason.

2.FSC Order Issued Under Article 14-5, Paragraph 1, Subparagraph 11 of the Securities and Exchange Act (Giving the Audit Committee the Authority to Review Employee Stock Warrants and Other Employee Incentive Tools)(2022/8/15)
(1)Pursuant to Article 14-5, Paragraph 1, Subparagraph 11 of the Securities and Exchange Act, the FSC order requires that any of the following proposed matters of an issuer be submitted for consent by the audit committee: distribution of employee stock warrants, distribution of new restricted employee shares, or a share buyback for purposes of transferring shares to employees who are not directors or managerial officers as provided for in Article 28-2, paragraph 1, subparagraph 1 of the Securities and Exchange Act.
(2)When reviewing matters under the preceding point, the audit committee must take into consideration matters including the individual performance and results of employees. 

3.Partial Amendment to the Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies (2022/8/17)
To strengthen the management of companies mandated to handle solicitation matters, enhance the reasonableness of solicitation-related contracts, as well as improve compliance of solicitors and companies mandated to handle solicitation matters, the Financial Supervisory Commission (FSC) issued an amendment to the Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies (hereinafter referred to as “Proxy Regulations.”) on 17 August, 2022. The important aspects of the amendments are as follows:
(1)Improve compliance of solicitors and companies mandated to handle solicitation matters: For those who have seriously violated the Proxy Regulations and are punished by the FSC (including proxy purchases, obtaining proxies by using others’ names, using a solicited proxy as a non-solicited proxy for attendance of a shareholders’ meeting, and being declared ineligible for being a solicitor), they will be disqualified from being solicitors or companies mandated to handle solicitation matters for the following year. In addition, the votes represented by violators will not be counted accordingly. 
(2)Enhance the qualifications and professionalism of companies mandated to handle solicitation matters: With reference to the provisions of practical experience of the executives at shareholder services agencies stipulated in the Regulations Governing the Administration of Shareholder Services of Public Companies, the Proxy Regulations now specifies that at least one of the executives handling solicitation affairs at the companies mandated to handle solicitation matters should have at least five years’ experience of shareholder services or solicitation work. Personnel who handle solicitation activities are also required to attend shareholder services training. In order to help all companies mandated to handle solicitation matters meet the said qualifications, a grace period is given till December 31, 2022.
(3)Strengthen the reasonableness and supervisory information of solicitation-related contracts: It is explicitly stipulated that solicitors entrusted by shareholders or companies mandated to handle solicitation matters by solicitors should specify their remuneration in their contracts. They should also thoroughly conduct the Know Your Customer work, examine the reasonableness of their contracts on a regular basis, and renew their contracts every year. Considering that it takes time to draw up contracts for solicitation, a grace period is given till December 31, 2022.

4.Exclusively Operated Futures Commission Merchants (FCMs) Now Allowed to Purchase Securities Investment Trust Funds Issued by a Securities Investment Trust Enterprise in Which a Shareholder in the FCM has an Equity Investment (2022/8/17)
To enable FCMs to use their own capital more efficiently, the FSC issued an order on 17 August 2022 that allows an exclusively operated FCM to purchase securities investment trust funds issued by a securities investment trust enterprise in which an enterprise (for example a securities firm) invested in shares of the FCM, or in which the FCM’s head office, has an equity investment. The order also specifies a limit on such purchases and sets out related procedural provisions.
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  • Update: 2022-11-28
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