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Taiwan Stock Exchange Corporation Operation Directions for Compliance with the Establishment of Board of Directors by TWSE Listed Companies and the Board's Exercise of Powers  CH

Amended Date: 2018.12.27
Article 1     These Directions are specially adopted to promote corporate governance, and to make the board of directors effectively exercise its duties and functions.
Article 2     These Directions are adopted pursuant to Article 2 of the Contract for the Listing of Stock, and Article 3 of the Contract for the Listing of Foreign Stock signed with the foreign issuer.
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Article 3     In addition to compliance with the Company Act, the Securities and Exchange Act and regulations of the competent authorities, a TWSE listed company shall act in accordance with these Directions and other rules of the TWSE when in its establishment of the board of directors and the board's exercise of powers.
    The term "TWSE listed company" as used in these Directions means the listed companies and primary listed companies as defined in Article 43 of the Operating Rules of the Taiwan Stock Exchange Corporation.
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Article 4     The minimum number of members of the board of a TWSE listed company is five, and the minimum number of independent directors is two or one fifth of the seats in the board, except for listed companies that are required to establish an audit committee under the Securities and Exchange Act, regulations of the competent authorities, and rules of the TWSE, in which case the minimum number of independent directors is three.
Article 5     The main agenda items, operational procedures, required content of meeting minutes, public announcements, and other compliance requirements for board meetings of a TWSE listed company shall be handled in accordance with the Regulations Governing Procedure for Board of Directors Meetings of Public Companies.
Article 6     A TWSE listed company shall comply with the regulations of the competent authorities by specifying adoption of the candidate nomination system for election of directors in its articles of incorporation.
Article 7     A TWSE listed company shall comply with the Securities and Exchange Act and the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies in its appointment of independent directors and their exercise of powers.
Article 8     When the number of directors falls below five due to the dismissal of a director for any reason, the company shall hold a director by-election at the next following shareholders meeting. When the number of directors falls short by one-third of the total number prescribed by the articles of incorporation, the company shall convene a special shareholders meeting within 60 days of the occurrence of that fact to hold a director by-election.
    When the number of independent directors at a TWSE listed company is lower than the requirement in Article 4 or its articles of incorporation, an independent director by-election shall be held at the next shareholders meeting. When all independent directors have been dismissed, the company shall convene a special shareholders meeting to hold a by-election within 60 days from the date on which the fact occurred.
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Article 9     The board of directors of a TWSE listed company shall follow the requirements of the Securities and Exchange Act, regulations of the competent authorities, and rules of the TWSE to establish committees such as the audit committee and remuneration committee, and may voluntarily establish other functional committees.
    A functional committee shall establish its regulations of organization, subject to approval by resolution at the board of directors meeting. The regulations of organization shall provide for matters including the number of the committee members, term of office, powers and authorities, rules of procedure, and resources provided by the company to facilitate its exercise of powers.
Article 10     The audit committee shall be composed of the entire number of independent directors. It shall not be fewer than three persons in number, one of whom shall be convener, and at least one of whom shall have accounting or financial expertise.
Article 11     A TWSE listed company shall comply with the Regulations Governing the Exercise of Powers by Audit Committees of Public Companies in its establishment of an audit committee and its exercise of powers.
Article 12     The member of the remuneration committee shall not be fewer than three persons in number, and a majority of its members shall be independent directors. The entire number of its members shall elect an independent director to act as convener and chairperson of a meeting.
    When the number of members of the remuneration committee falls below three due to the dismissal of a member for any reason, the company shall convene a board of directors meeting within three months of the occurrence of that fact to hold a by-election for members. In the event, however, that an independent director is dismissed and there is no other independent director, the company may appoint someone who is not qualified to act as independent director to be a member of the remuneration committee prior to appointment of independent director at a by-election in accordance with Article 8, who will be replaced by the independent director elected in the by-election.
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Article 13     A TWSE listed company shall company with the Securities and Exchange Act and the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter in its establishment of a remuneration committee and its exercise of powers.
Article 14     Members of the board of directors shall faithfully conduct corporate affairs and perform the duty of care of a good administrator. In conducting the affairs of the company, they shall exercise their powers with a high level of self-discipline and prudence. Unless matters are otherwise reserved by law or in the articles of incorporation for approval in shareholders meetings, they shall ensure that all matters are handled according to the resolutions of board of directors.
Article 15     A TWSE listed company may not impede, refuse, or evade the actions of the independent directors in the performance of their duties. As the independent directors deem necessary to the performance of their duties, they may request the board of directors to appoint relevant personnel, or may at their own discretion hire professionals to provide assistance. The related expenses will be borne by the TWSE listed company.
    A TWSE listed company shall establish a standard operational protocol for responding to requests from directors, covering issues such as personnel resources and required period for handling matters, and shall adequately and timely respond to requests from directors.
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Article 16     A TWSE listed company shall take out directors and supervisors liability insurance with respect to liabilities resulting from exercising their duties during their term of office.
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Article 17     A TWSE listed company shall disclose information on the remuneration paid to directors, supervisors, general manager, vice general managers in the most recent year in accordance with the Regulations Governing Information to be Published in Annual Reports of Public Companies.
Article 18     A TWSE listed company shall regularly evaluate the performance of the board of directors and conduct self-evaluation or peer review of individual board members every year and report the results of performance evaluation to the TWSE.
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Article 19     Performance evaluations of the board of directors should cover the following aspects and the criteria for evaluation should be established with the company's needs being taken into consideration:
  1. Participation in the operation of the company;
  2. Improvement of the quality of the board of directors' decision making;
  3. Composition and structure of the board of directors;
  4. Election and continuing education of the directors; and
  5. Internal control.
    Performance evaluation of the board members (on themselves or peers) should cover the following aspects and is subject to appropriate adjustments with the company's needs being taken into consideration:
  1. Alignment of the goals and mission of the company;
  2. Awareness of the duties of a director;
  3. Participation in the operation of the company;
  4. Management of internal relationship and communication;
  5. The director's professionalism and continuing education; and
  6. Internal control.
Article 20     The board of directors of a TWSE listed company shall appoint a unit to be in charge of meeting-related matters in accordance with the Regulations Governing Procedure for Board of Directors Meetings of Public Companies.
    A TWSE listed company shall have in place, according to its business size, business condition, management needs, qualified corporate governance persons in an appropriate number and shall appoint one chief corporate governance officer as the most senior executive for corporate governance matters.
    A TWSE listed company with paid-in capital of NT$10 billion or more or within the financial and insurance industry required by the competent authorities shall appoint the chief corporate governance officer.
    A TWSE listed company shall comply with these Directions in appointing its chief corporate governance officer, unless otherwise provided under the regulations of the competent authorities.
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Article 21     Corporate governance affairs described in the second paragraph of the preceding article shall cover, at a minimum, the following:
  1. Handling of matters relating to board of directors meetings and shareholders meetings in compliance with law;
  2. Preparation of minutes of the board of directors meetings and shareholders meetings;
  3. Assistance in onboarding and continuing education of the directors and supervisors;
  4. Provision of information required for performance of duties by the directors and supervisors;
  5. Assistance in the directors' and supervisors' compliance of law; and
  6. Other matters described or established in the articles of incorporation or under contract.
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Article 22     A chief corporate governance officer is a manager of the company and shall comply with sections governing managers of the Company Act and the Securities and Exchange Act.
    Unless otherwise provided by law, the chief corporate governance officer may be someone who concurrently holds another position in the company.
    In case of a chief corporate governance officer who concurrently holds a different position in the company, it shall be ensured the officer is effectively performing the duties required in the capacity of both the chief corporate governance officer and the concurrent position, and there shall be no conflicts of interest or violations of the internal control system.
Article 23     A chief corporate governance officer shall be a qualified, practice-eligible lawyer or accountant or have been in a managerial position for at least three years in a securities, financial, or futures related institution or a public company in handling legal affairs, financial affairs, stock affairs, or corporate governance affairs as specified in Article 21.
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Article 24     A TWSE listed company shall arrange continuing professional education (CPE) for its chief corporate governance officer.
    A newly appointed chief corporate governance officer shall complete a minimum of 18 CPE hours within the year from the person's appointment and a minimum of 12 CPE hours per year in each following year. The continuing education scope, continuing education system and other continuing education affairs shall be governed by the Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies.
Article 25     In case of resignation or dismissal of the chief corporate governance officer under the third paragraph of Article 20, a TWSE listed company shall appoint another person as its chief corporate governance officer within one month of the occurrence of that fact.
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Article 26     In the event of violation of the requirements under the second paragraph of Article 8 by a TWSE listed company, the TWSE shall impose a penalty of NT$100,000 on the company, and require it to hold a by-election within 60 days from the date of notification by the TWSE.
    If the TWSE listed company fails to hold a by-election for independent directors by the deadline set forth in the preceding paragraph, the TWSE may classify the company's TWSE listed securities as "securities under an altered trading method."If a by-election is not held within three months from the date when the trading method is altered, the TWSE may suspend the trading of the TWSE listed securities and report the suspension to the competent authority for recordation. If a by-election is not held within six months from the suspension of trading, the TWSE may delist the company's securities report the delisting to the competent authority for recordation.
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Article 27     In the event of a TWSE listed company's violation of the requirements under Article 6, the first paragraph of Article 8, the first paragraph of Article 9, Articles 10 and 12, the second paragraph of Article 15, Articles 16 to 18, the third paragraph of Article 20 or Articles 21 to 25, the TWSE may impose a penalty of NT$30,000 on the company and require it to make the correction within a specified period of time. Failure to make the correction within the specified period of time will subject the company to a penalty of NT$10,000 for each business day until it has made the correction.
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Article 28     If a TWSE listed company is in either of the circumstances in the preceding two articles, the TWSE shall also disclose to the public the information about the penalty imposed on the company.
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Article 29     Reporting of information and measures against violation under these Directions shall be governed by the TWSE Rules Governing Information Filing by Companies with TWSE Listed Securities and Offshore Fund Institutions with TWSE Listed Offshore Exchange-Traded Funds, and the Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities.
Article 30     These Directions and any amendments hereto shall enter into force following submission to and recordation by the competent authority and publication by the TWSE.