CHAPTER V Company Limited by Shares
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Section 1.Incorporation
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| Article 128 | A company limited by shares shall have two or more promoters.
Any person without disposing capacity, with limited disposing capacity or having been adjudicated of the commencement of assistantship and such assistantship having not been revoked yet is not qualified as a promoter.
Any government agency or any juristic person may become a promoter, provided, however, that the juristic person eligible to act as a promoter shall be limited to that conforming to any of the following requirements:
- a company or a limited partnership;
- a juristic person which contributes any proprietary technology or intellectual property right created on its own through research and development as its investment capital contribution; or
- a juristic person which is operating a category of business that has been recognized and approved to be in conformity with the objective of its incorporation by the central authority in charge of the end enterprise involved.
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| Article 128-1 | A company limited by shares which is organized by a single government shareholder or a single juristic person shareholder shall be free from restrictive requirement set out in Paragraph One of the preceding Article. The functional duties and power of the shareholders’ meeting of such company shall be exercised by its board of directors, to which the provisions governing the shareholders’ meeting as set out in this Act shall not apply.
The company referred to in the preceding paragraph may choose not to have the board of directors but to have one or two directors; for a company with only one director, such director shall be the chairman and the functional duties and powers of the board of directors shall be exercised by such director, and the provisions governing the board of directors as set out in this Act shall not apply to such company; for a company with two directors, the provisions governing the board of directors as set out in this Act shall apply mutatis mutandis.
The company referred to in Paragraph One may choose not to have supervisors; the provisions governing supervisors as set out in this Act shall not apply to such company.
The directors and supervisors of the company referred to in Paragraph One shall be appointed by such government shareholder or juristic person shareholder.
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| Article 129 | The promoters of a company limited by shares shall draw up the Articles of Incorporation containing the following particulars and shall affix thereon their respective signatures or personal seals:
- The name of the company;
- The scope of business to be operated by the company;
- For a company issuing par value shares, the total number of shares and the par value of each share certificate; for a company issuing no par value shares, the total number of shares.
- The location of the company;
- The number of directors and supervisors, and the term of their respective offices; and
- The date of establishment of the Articles of Incorporation.
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| Article 130 | The following matters shall not take effect, unless they are stipulated in the Articles of Incorporation:
- Establishment of branch office;
- The cause(s) for dissolution of the company, if any;
- The kind of special shares and the rights and obligations covered by such shares; and
- Special benefits to be accorded to promoters, and the name of such beneficiaries.
The shareholders’ meeting may make change of the special benefits accordable to promoters under the provision set out in Item Four of the preceding Paragraph provided that such change shall not result in any prejudice to the benefits already accrued to the promoters.
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| Article 131 | The promoters, after having subscribed in the first issue to the total number of shares, shall make full payment for the numbers of shares respectively subscribed to, and elect directors and supervisors.
The provisions of Article 198 shall apply mutatis mutandis to the aforesaid election.
Equity capital to be contributed other than cash by promoters may be in the form of the property or technical know-how required by the business of the company.
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| Article 132 | In case the promoters have not subscribed to the total number of shares in the first issue, the remainder shares shall be subscribed to by solicitation.
When the aforesaid subscription to shares is to be solicited, special shares may be issued in accordance with the provisions of Article 157.
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| Article 133 | The promoters, when publicly soliciting subscriptions to shares, shall first have the following documents and information prepared, and then file the same along with an application to the authority in charge of securities exchange for examination and approval:
- Business plan;
- Full names and resumes of the promoters, and the number of shares subscribed, and the kind of contribution;
- Prospectus;
- Names and locations of banks or post offices authorized to collect payment for shares subscribed;
- Names of underwriters or agents, if any, and the covenants between the promoters and such underwriters or agents; and
- Other matters as may be prescribed by the authority in charge of securities exchange.
The total number of shares subscribed by the aforesaid promoters shall not be less than one-fourth of the total number of shares in the first issue.
Within thirty days after receiving a notice from the authority in charge of securities exchange, all documents and information specified in various items of Paragraph 1 of this Article shall be annotated with the reference number and date of the approval letter and publicly announced provided, however, that the covenants referred to in Item 5 of the Paragraph 1 may be exempt from public announcement.
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| Article 134 | Banks or post offices authorized to collect payments for shares subscribed to shall have the obligation to certify the amount of money received, and the amount so certified shall be deemed as the capital money already received.
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| Article 135 | Upon finding either of the following discrepancies in an application for public offering of shares, the authority in charge of securities may disapprove the application or may revoke its approval previously granted to the applicant:
- Where any statement made in the application is found to be contrary to the applicable laws and/or regulations or to be false; or
- Where there is any change in the matters described in the application; and no correction thereto has been made within a given time limit after having been required to do so.
Under the circumstance set forth in Item 2 of the preceding Paragraph, the authority in charge of securities may impose on each of the promoters a fine in an amount not less than NT$ 20,000 but not more than NT$ 100,000.
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| Article 136 | In case of annulment of approval in accordance with the preceding articles, the solicitation shall be cancelled if not yet in progress; if solicitation is already in progress, persons so drafted may demand a refund of the original issuing value of shares plus interests thereon to be calculated at the legal rate.
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| Article 137 | The prospectus shall state the following particulars:
- Particulars set forth in Article 129 and Article 130;
- Number of shares subscribed to by each of the promoters;
- If share certificates are issued above par value, the issuing value;
- The time-limit for full subscription by solicitation and the statement that if the shares are not subscribed in full within such time-limit, the subscribers may rescind their subscription; and
- In case special shares are issued, the total amount of such shares and the matters specified in various items of Paragraph One of Article 157.
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| Article 138 | The promoters shall prepare a share subscription form indicating therein the matters required in Paragraph One, Article 133 and the reference number and the date of the approval letter given by the authority in charge of securities, and shall make such form available to the subscribers for them to fill in the number and amount of the shares to be subscribed and their respective domiciles or residences, and to affix thereon their respective signatures or personal seals.
In case the share certificates are issued at a premium, the subscribers shall indicate in the share subscription form the amount of share price they agree to pay.
In the event the promoters violate the provisions of Paragraph One of this Article by failing to prepare and make available the share subscription forms, the authority in charge of securities shall impose on them a fine in an amount not less than NT$ 10,000 but not more than NT$ 50,000.
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| Article 139 | Subscribers shall have the obligation to pay for the shares they have subscribed to in the subscription form.
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| Article 140 | For a company issuing par value shares, its issue price of share certificates shall not be less than the par value thereof, unless otherwise provided for by the competent authority in charge of securities affairs for public companies.
For a company issuing no par value shares, its issue price of share certificate shall have no restrictions.
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| Article 141 | When the total number of shares in the first issue has been subscribed to in full, the promoters shall immediately press each of the subscribers for payment. Where share certificates are issued above the par value thereof, the amount in excess of such value shall be collected at the same time with the payment for shares.
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| Article 142 | Where subscriber delays payment for shares as provided in the preceding article, the promoters shall fix a period of not less than one month and call upon each subscriber to pay up, declaring that in case of default of payment within the stipulated period their right shall be forfeited.
After the promoters have made the aforesaid call, the subscribers who fail to pay accordingly shall forfeit their rights and the shares subscribed to by them shall be otherwise sold.
Under the aforesaid circumstances, compensation for loss or damage, if any, may still be claimed against such defaulting subscribers.
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| Article 143 | After the share price payable by all subscribers under the preceding Article has been fully paid up, the inaugural meeting of the company shall be convened by the promoters within two months.
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| Article 144 | The provisions of Paragraphs One, Four, Five of Article 172, Article 174, Article 175, Article 177, Article 178, Article 179, Article 181, Paragraphs One, Two, Four, Five of Article 183 and Articles 189 to 191 shall apply mutatis mutandis to the procedure and resolutions of the inaugural meeting; however, in the election of directors and supervisors, the provisions of Article 198 shall apply mutatis mutandis.
The promoter who fails to comply with Paragraphs One, Five of Article 172 or Paragraphs One, Four, Five of Article 183 as applied mutatis mutandis in the preceding paragraph shall be imposed with a fine in an amount of not less than NT$ 10,000 but not more than NT$ 50,000.
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| Article 145 | At the inaugural meeting of the company, the following matters shall be reported by the promoters:
- The Articles of Incorporation;
- The roster of shareholders;
- The total number of shares issued;
- The name of subscribers and the kinds, quantities, values or appraisal standards of the property, technical know-how other than cash provided by subscribers as their capital contributions, if any;
- The incorporation costs to be borne by the company, and the remuneration payable to promoters;
- The total number of special shares, if any, to be issued; and
- The roster of directors and supervisors of the company, which roster shall indicate the domiciles or residences, the serial number of ID Cards or the reference number of the status certificates issued by the government of them.
Upon finding of any false statements in the report made under the preceding Paragraph, the promoters shall each be imposed with a fine in an amount not more than NT$ 60,000.
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| Article 146 | At the inaugural meeting of a company, election of the directors and supervisors shall be effected. The directors and supervisors elect shall, upon election, immediately investigate the accuracy of the matters reported by promoters under the preceding Article, and shall report to the inaugural meeting of the investigation results.
Where any promoter is elected a director or a supervisor who has a personal interests in the matters subject to investigation, then the inaugural meeting shall elect another person as the substitute of said promoter to perform the investigation.
If anything contained in the promoters report is found excessive or false in the course of investigation conducted under the preceding two Paragraphs, appropriate cut-off or reduction shall be made by the inaugural meeting;
If any promoter impedes the investigation, or if any director, supervisor or investigator makes false report, he/she shall be imposed with a fine in an amount not more than NT$ 60,000;
Upon request of the directors, supervisors or investigators for extension of the deadline date for submission of the investigation report under either of the provisions of the preceding two Paragraphs, the inaugural meeting may decide, by applying the provisions of Article 182 of this Act mutatis mutandis, to postpone or to reconvene the inaugural meeting.
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| Article 147 | The inaugural meeting may curtail the remuneration given or special privileges accorded to the promoters and expense incurred in the incorporation of the company, if any is found excessive. If the payment on shares other than in cash is overestimated in value, the inaugural meeting may reduce the number of shares to be given or order the subscriber to make up for the deficiency.
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| Article 148 | All shares in the first issue, which have not been subscribed to and those which, though subscribed, have not been paid for, shall be subscribed and paid for the promoters jointly and severally. The same shall apply to those shares which have been subscribed but eventually rescinded.
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| Article 149 | In the circumstances specified in Article 147 and Article 148, the company may claim against the promoters for compensation for loss or damage, if any.
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| Article 150 | In the event that a company not be formed, the promoter shall be jointly and severally responsible for the consequence of their acts in forming the company and all expenses incurred. The same shall apply to that portion of the expenses which were curtailed on account of being excessive
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| Article 151 | The inauguration meeting may amend the Articles of Incorporation or resolve not to incorporate the company.
The provisions of Article 277, Paragraphs 2 through 4 shall apply, mutatis mutandis, to the aforesaid amendment of Articles of Incorporation; and the provisions of Article 316 shall apply, mutatis mutandis, to the aforesaid resolution not to incorporate the company.
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| Article 152 | Where three months have elapsed after the total number of shares in the first issue has been contributed but the payment for which has not been fully met, or, where the payment has been fully met but the promoters have not called the inaugural meeting within two months, the subscribers may rescind their subscription.
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| Article 153 | After the conclusion of the inaugural meeting, no subscriber may rescind his subscription.
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| Article 154 | The liability of shareholders to the company shall, unless otherwise provided in the paragraph 2, be limited to payment in full of the shares they have subscribed.
If a shareholder abuses the company’s status as a legal entity and thus causes the company to bear specific debts and to be apparently difficult for the company to pay such debts, and if such abuse is of a severe nature, the shareholder shall, if necessary, be liable for the debts.
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| Article 155 | The promoters shall be jointly and severally liable to the company for compensation for loss or damage in consequence of an neglect on their part in the performance of their duties connected with the formation of the company.
The promoters shall, even after incorporation, be jointly and severally liable for debts of the company incurred prior to incorporation.
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Section 2.Shares
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| Article 156 | The capital of a company limited by shares shall be divided into shares, and a company shall choose either par value or no par value shares when issuing shares.
For a company issuing par value shares, each share shall have the same par value; for a company issuing no par value shares, the payment for such no par value shares shall be fully set aside as equity capital.
A portion of the shares may be designated as special shares, with the kind of such special shares to be specified in the Articles of Incorporation.
The total number of shares as specified in the Articles of Incorporation may be issued in installments; for shares to be issued at the same time and under the same conditions of issuance, the issuance price thereof shall be the same. The method to determine the issuance price for a public company may be prescribed by the competent authority in charge of securities affairs.
Equity capital to be contributed other than cash by shareholders may be in the form of monetary credit extended to the company, or the property or technical know-how required by the company, provided, however, that the amount of such substitutive capital contribution shall require a prior approval of the board of directors.
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| Article 156-1 | A company may convert all of the issued par value shares into no par value shares by a resolution adopted, at a shareholders’ meeting, by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares; the capital reserve set aside based on Item One, Paragraph One of Article 241 before such convert shall become equity capital in whole.
Where there is any higher percentage of the total number of shares represented by the shareholders present and/or the total number of the voting rights required in the Articles of Incorporation for the preceding paragraph, such higher percentage shall prevail.
When a company issuing share certificates converts all of its par value shares into no par value shares in accordance with Paragraph One, the share price of issued par value shares shall be considered to be not written from the record date of such convert.
Under the circumstance of preceding paragraph, the company shall give notice to each shareholder to exchange his/her shares within 6 months from the record date of such convert.
The preceding four paragraphs shall not apply to public companies.
A company choosing to issue no par value shares shall not convert its shares into par value shares.
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| Article 156-2 | A company may, in pursuance of the resolution adopted by its board of directors, apply to the competent authority in charge of securities affairs for an approval of public issuance of its shares. A company may apply for an approval of ceasing its status as a public company by a resolution adopted, at a shareholders’ meeting, by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares.
In the event the total number of shares represented by the shareholders present at a shareholders’ meeting of a company whose shares have been issued in public is less than the percentage of the total shareholdings required in the preceding Paragraph, the resolution may be adopted by two-third of the voting rights exercised by the shareholders present at the shareholders’ meeting who represent a majority of the outstanding shares of the company.
Where there is any higher percentage of the total number of shares represented by the shareholders present and/or the total number of the voting rights required in the Articles of Incorporation for the preceding two paragraphs, such higher percentage shall prevail.
A public company has resolved, moved to an unknown place, or failed to perform the duties as a public company under the Securities and Exchange Act for causes not attributable to the company, the competent authority in charge of securities affairs may cease its status as a public company.
In the case of a government owned company, the public issuance of its shares and the cease of its status as a public company shall require a special prior approval of the competent authority in charge of such enterprise.
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| Article 156-3 | After its incorporation, the company may, pursuant to a resolution adopted by a majority vote of a meeting of the board of directors attended by two-thirds or more of all the directors, issue new shares as the consideration payable by the company for its acquisition of the shares of another company, without being subject to the restrictions set out respectively in Paragraphs One through Three, Article 267 of this Act.
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| Article 156-4 | After its incorporation, for improving its financial structure or resuming its normal operation, the company participating in the special approval of the governmental bailout program may issue and transfer new shares to the government as the consideration for receiving governmental financial help. Such issuing procedure shall not be subject to the restrictions regarding issuance of new shares set forth in this Act and the regulations thereof shall be prescribed by the central competent authority.
In the case that the bailout program under the preceding paragraph reaches NTD 1 billion, the competent authority of the special approval and the company receiving such bailout shall report its self-help plan to the Legislative Yuan.
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| Article 157 | Where a company is to issue special shares, it shall include in its Articles of Incorporation provisions concerning:
- Order, fixed amount or fixed ratio of allocation of dividends and bonus on special shares;
- Order, fixed amount or fixed ratio of allocation of surplus assets of the company;
- Order of or restriction on or no voting right on the exercise of voting power by special shareholders;
- Multiple voting right or veto power over specific matters on the exercise of voting power;
- Any prohibition or restriction regarding special shareholders’ rights of being elected as directors and/or supervisors or rights of electing a certain amount of seats of directors;
- Number, method or formula for special shares to be converted into common shares;
- Restrictions on transfer of special shares; and
- Other matters concerning rights and obligations incidental to special shares.
Special shareholders with multiple voting right as referred to in Item Four of the preceding paragraph shall have the same voting right as common shareholders for the election of supervisors.
The following special shares shall not apply to a public company:
- Special shares referred to in Item Four, Five and Seven of the preceding paragraph.
- Special shares to be converted into multiple common shares.
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| Article 158 | All special shares issued by a company shall be redeemable, provided that the privileges accorded to special shareholders by the Articles of Incorporation shall not be impaired.
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| Article 159 | In case a company has issued special shares, any modification or alteration in the Articles of Incorporation prejudicial to the privileges of special shareholders shall be adopted in a resolution by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares and shall also be adopted by a meeting of special shareholders.
For a company whose share certificates have been publicly issued, if the total number of shares represented by shareholders attending a shareholders' meeting is not sufficient to meet the criteria as specified in the preceding paragraph, the said resolution may be adopted by a large majority representing two thirds of the votes at a shareholders' meeting attended by shareholders representing a majority of the total number of issued shares, and a favorable resolution to be adopted by a meeting of special shareholders shall be also be required.
In case stricter criteria for the total number of shares represented by the attending shareholders and the number of votes at the shareholders' meetings referred to in the preceding two paragraph are specified in the Articles of Incorporation of a company, such stricter criteria shall govern.
The provisions governing shareholders' meetings shall apply.
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| Article 160 | Where there are several persons owning the same share or shares, such co-owners shall select one of them for the exercise of their shareholders rights.
The co-owners of a share shall be jointly and severally liable to the company to pay for the share so owned.
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| Article 161 | A company shall not issue share certificates, unless it has completed the procedure for incorporation registration or for company alteration registration as required for issuance of new shares. However, this clause shall not apply to the companies whose share certificates are to be issued under the provisions otherwise provided for by the authority in charge of securities.
Share certificate issued in violation of the provisions set out in the preceding Paragraph shall be null and void. However, holders of such share certificates may claim for damages against the issuers of such share certificates.
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| Article 161-1 | A public company shall, within three months after having completed the procedures for company incorporation registration or for company alteration registration as required for issuance of new shares, issue its capital shares.
The responsible persons of a company who violate the provisions set out in the preceding paragraph for failing to issue share certificates shall be ordered by the competent authority in charge of securities affairs to effect the issuance of share certificate within a given time limit, and each of them shall further be subject to a fine in an amount of not less than NT$ 240,000 but not more than NT$ 2,400,000; and upon failure to comply with the said order, they shall be ordered again to issue the share certificates within another given time limit and may be enforced successively each time against any further violation thereafter until the time when the issuance of share certificates is effected as required.
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| Article 161-2 | For the shares to be issued by a company, the issuing company may be exempted from printing any share certificate for the shares issued.
A company not printing its share certificate in accordance with the provision of the preceding paragraph shall register the issued shares with a centralized securities depositary enterprise and follow the regulations of that enterprise.
The transfer and creation of pledge for the shares registered with a centralized securities depositary enterprise shall be handled by the company or by way of book-entry transfer; Article 164 of this Act and Article 908 of the Civil Code shall not apply.
The preceding paragraph shall not apply to shares printed but not returned to the company.
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| Article 162 | A company issuing and printing shares shall assign its share certificates with serial numbers, shall indicate the following particulars on such share certificates, and the share certificates shall be affixed with the signatures or personal seals of the director representing the company, and shall be duly certified or authenticated by the bank which is competent to certify shares under the laws before issuance thereof:
- The name of the company;
- The date of incorporation registration, or the date of company alteration registration for issuance of new shares;
- For shares with par value, the total number of shares and share price; for shares with no par value , the total number of shares.
- The number of shares issued this time;
- The words "share certificates of promoters" shall be marked on the share certificates to be issued to promoters;
- In the case of special share certificates, the words describing the class of such special shares shall be marked thereon; and
- The date of issue of the share certificate.
A registered share certificate shall bear the true name of the shareholder thereof. Where a plural number of share certificates are held by a same person, his/her name shall be indicated on all such share certificates. For share certificate(s) to be held by a government agency or a corporate shareholder, the name of such government agency or such corporate shareholder shall be indicated thereon, and no other shareholder’s name nor only the name of the representative of such government shareholder or corporate shareholder may be indicated thereof.
The rules governing certification or authentication of share certificates to be issued under Paragraph One of this Article shall be prescribed by the central competent authority. However, the provision set out in this Paragraph shall not apply to the companies offering their respective share certificates to the public in accordance with the rules otherwise prescribed by the competent authority in charge of securities affairs.
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| Article 162-1 | (Deleted)
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| Article 162-2 | (Deleted)
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| Article 163 | Unless as otherwise provided for in this Act, assignment/transfer of shares of a company shall not be prohibited or restricted by any provision in the Articles of Incorporation of the issuing company, but shall not be effected until the incorporation registration of the company.
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| Article 164 | Share certificate shall be assigned only by the holder thereof by way of endorsement, and the name or title of the assignee shall be indicated on the share certificate.
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| Article 165 | Assignment/transfer of shares shall not be set up as a defence against the issuing company, unless name/title and residence/domicile of the assignee/transferee have been recorded in the shareholders' roster.
The entries in the shareholders' roster referred to in the preceding Paragraph shall not be altered within 30 days prior to the convening date of a regular shareholders' meeting, or within 15 days prior to the convening date of a special shareholders' meeting, or within 5 days prior to the target date fixed by the issuing company for distribution of dividends, bonus or other benefits.
In the case of a company whose shares are issued to the public, the entries in its shareholders' roster shall not be altered within 60 days prior to the convening date of a regular shareholders' meeting, or within 30 days prior to the convening date of a special shareholders' meeting.
The periods specified in the preceding two Paragraphs shall commence from the applicable convening date of shareholders' meeting or from the applicable target date, as the case may be.
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| Article 166 | (Deleted)
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| Article 167 | Subject to the provisions otherwise set out in Article 158, Article 167-1, Article 186, Article 235-1 and Article 317 of this Act, a company may not, at its own discretion, redeem or buy back any of its outstanding shares, nor may it accept any of its outstanding shares as a security in pledge, unless a shareholder is in liquidation or adjudged bankrupt, in which case, the shares being held by the said shareholder may be bought back by the issuing company at the market price, with the buy-back price payable to the said shareholder to be withheld for off-setting the debt owed to the company by said shareholder prior to the process of the foregoing liquidation or bankruptcy pronouncement.
The shares redeemed or bought back by the issuing company in accordance with the proviso of the preceding Paragraph or the provisions of Article 186 hereof shall be sold at the then current market price within six months. If the shares so redeemed or bought back remain unsold after expiry of the foregoing time limit, such shares shall be deemed as the shares which have never been issued by the company; and under such circumstance, the company shall apply for an alteration of the entries of the then existing corporate registration in respect of such shares accordingly.
Where a majority of the total number of outstanding voting shares or of the total amount of the capital stock of a subordinate company are held by its holding company, the shares of the holding company shall not be purchased nor be accepted as a security in pledge by the said subordinate company.
Where the holding company and its subordinate company as referred to in the preceding Paragraph jointly hold or possess a majority of the total number of outstanding shares or of the total amount of the capital stock of another company, the shares of the said holding company and its subordinate company shall also not be purchased nor be accepted as a security in pledge by the said another company.
Where the responsible person of a company has acted contrary to any provisions set out in the preceding four Paragraphs by redeeming or buy back its outstanding shares, or accepting such shares as the security in pledge, or raising the share price for offsetting its outstanding debt, or reducing the selling price of such shares, he/she shall be liable for the damage to the company.
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| Article 167-1 | Unless as otherwise provided for in the law, a company may, upon adoption of a resolution by a majority voting of the directors present at a meeting of its board of directors attended by two-thirds of the directors of the company, buy back its shares in a number not exceeding 5% of the total number of its outstanding shares provided, however, that the total amount of the price for buying back such shares shall not exceed the sum of the amount of its reserved surplus earnings plus the amount of the realized capital reserve.
The shares bought back by the issuing company under the preceding Paragraph shall be assigned or transferred to its employees within three years. If such shares have not been transferred as required after expiry of the foregoing time limit, such shares shall be deemed as the shares which have never been issued; and under this circumstance, the company shall apply for a necessary alteration registration in respect of such shares accordingly.
The issuing company of the shares bought back under Paragraph I of this Article shall not be entitled to exercise the rights of a shareholder in respect of such shares.
Qualification requirements of employees, including the employees of parents or subsidiaries of the company meeting certain specific requirements, entitled to receive shares in accordance with the provision of Paragraph Two, may be specified in the Articles of Incorporation.
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| Article 167-2 | Unless as otherwise provided for in the law or in the Articles of Incorporation, a company may, upon adoption of a resolution by a majority of the directors present at a meeting of the board of directors attended by two-thirds of more of the total number of directors of the company, enter into a share subscription right agreement with its employees whereby the employees may subscribe, within a specific period of time, a specific number of shares of the company. Upon execution of the said agreement, the company shall issue to each employee a share subscription warrant.
The share subscription warrant obtained by any employee of the issuing company shall be non-assignment, except to the heir(s) of the said employee.
Qualification requirements of employees, including the employees of parents or subsidiaries of the company meeting certain specific requirements, entitled to receive share subscription warrant in accordance with the provision of Paragraph One, may be specified in the Articles of Incorporation.
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| Article 167-3 | A company which buys back its shares and assigns or transfers those shares to its employees in accordance with Article 167-1 or other laws may restrain such shares from being assigned or transferred to others within a specific period of time which shall in no case be longer than two years.
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| Article 168 | A company shall not cancel its shares, unless a resolution on capital reduction has been adopted by its shareholders' meeting; and capital reduction shall be effected based on the percentage of shareholding of the shareholders pro rata, unless otherwise provided for in this Act or any other governing laws.
A company reducing its capital may return share prices (or the capital stock) to shareholders by properties other than cash; the returned property and the amount of such substitutive capital contribution shall require a prior approval of the shareholders’ meeting and obtain consents from the shareholders who receive such property.
The board of directors shall first have the value of such property and the amount of such substitutive capital contribution set forth in the preceding Paragraph audited and certified by a certified public accountant before the shareholders’ meeting.
Where a company cancels its shares in a manner in violation to the provisions set out in Paragraphs One to Three of this Article, the responsible person(s) of the company shall (each) be imposed with a fine in an amount not less than NT$ 20,000 but not more than NT$ 100,000.
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| Article 168-1 | Where a company has a need to reduce and to increase it capital stock before the end of any fiscal year in order to offset its loss, the board of directors shall, at least 30 days prior to the convening date of the shareholders' meeting, forward the financial statements and a loss offsetting proposal to the supervisors for their auditing before submitting the audited version thereof to the shareholders' meeting for review and approval by a resolution.
In case the audited financial statements and the loss offsetting proposal are submitted to a special shareholders' meeting under the provisions of the preceding Paragraph, the provisions of Articles 229 through 231 of this Act shall apply mutatis mutandis.
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| Article 169 | The shareholders’ roster of a company shall be assigned with serial numbers and shall contain the following particulars:
- The name or title and the domicile or residence of the shareholders;
- The number of shares held by each shareholder; and the serial number(s) of share certificate(s), if issued, by that shareholder;
- The date of issuance of the share certificates; and
- The words describing the type of special shares, if special shares are issued.
Where computerized operation or machine processing operation is used in the company, then the information as required in the preceding Paragraph may be annexed to the shareholders’ roster with relevant supplemental tables.
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Section 3.Shareholders' Meeting
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| Article 170 | Shareholders' meeting shall be of the following two kinds:
- Regular meeting of shareholders: to be held at least once every year.
- Special meeting of shareholders: to be held when necessary.
The regular meeting of shareholders referred to in the preceding Paragraph shall be convened within six months after close of each fiscal year, unless otherwise approved by the competent authority for good cause shown.
The director who is authorized to represent the company and fails to call a regular shareholders' meeting within the time limit specified in the preceding Paragraph shall be imposed with a fine in an amount not less than NT$ 10,000 but not more than NT$ 50,000.
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| Article 171 | A shareholders meeting shall, unless otherwise provided for in this Act, be convened by the Board of Directors.
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| Article 172 | A notice to convene a regular meeting of shareholders shall be given to each shareholder no later than 20 days prior to the scheduled meeting date.
A notice to convene a special meeting of shareholders shall be given to each shareholder no later than 10 days prior to the scheduled meeting date.
For a public company, a notice to convene a regular meeting of shareholders shall be given to each shareholder no later than 30 days prior to the scheduled meeting date. In case a public company intends to convene a special meeting of shareholders, a meeting notice shall be given to each shareholders no later than 15 days prior to the scheduled meeting date.
The cause(s) or subject(s) of a meeting of shareholders to be convened shall be indicated in the individual notice to be given to shareholders; and the notice may, as an alternative, be given by means of electronic transmission, after obtaining a prior consent from the recipient(s) thereof.
Matters pertaining to election or discharge of directors and supervisors, alteration of the Articles of Incorporation, reduction of capital, application for the approval of ceasing its status as a public company, approval of competing with the company by directors, surplus profit distributed in the form of new shares, reserve distributed in the form of new shares, dissolution, merger, spin-off, or any matters as set forth in Paragraph I, Article 185 hereof shall be itemized in the causes or subjects to be described and the essential contents shall be explained in the notice to convene a meeting of shareholders, and shall not be brought up as extemporary motions; the essential contents may be posted on the website designated by the competent authority in charge of securities affairs or the company, and such website shall be indicated in the above notice.
The director representing the company who fails to comply with Paragraphs One, to Three and the preceding paragraph shall be imposed with a fine in an amount of not less than NT$ 10,000 but not more than NT$ 50,000; for a public company, the director representing the company shall be imposed by the competent authority in charge of securities affairs with a fine in the amount of not less than NT$240, 000 but not more than NT$2,400,000.
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| Article 172-1 | Shareholder(s) holding one percent (1%) or more of the total number of outstanding shares of a company may propose to the company a proposal for discussion at a regular shareholders’ meeting, provided that only one matter shall be allowed in each single proposal, and in case a proposal contains more than one matter, such proposal shall not be included in the agenda.
Prior to the date on which share transfer registration is suspended before the convention of a regular shareholders’ meeting, the company shall give a public notice announcing acceptance of proposal in writing or by way of electronic transmission, the place and the period for shareholders to submit proposals to be discussed at the meeting; and the period for accepting such proposals shall not be less than ten (10) days.
The number of words of a proposal to be submitted by a shareholder shall be limited to not more than three hundred (300) words, and any proposal containing more than 300 words shall not be included in the agenda of the shareholders’ meeting. The shareholder who has submitted a proposal shall attend, in person or by a proxy, the regular shareholders’ meeting whereat his proposal is to be discussed and shall take part in the discussion of such proposal.
Unless any of the following circumstances is satisfied, the board of directors of the company shall include the proposal submitted by a shareholder in the list of proposals to be discussed at a regular meeting of shareholders:
- Where the subject (the issue) of the said proposal cannot be settled or resolved by a resolution to be adopted at a meeting of shareholders;
- Where the number of shares of the company in the possession of the shareholder making the said proposal is less than one percent (1%) of the total number of outstanding shares at the time when the share transfer registration is suspended by the company in accordance with the provisions set out in Paragraph II or Paragraph III, Article 165 of this Act;
- Where the said proposal is submitted on a day beyond the deadline fixed and announced by the company for accepting shareholders’ proposals; and
- Where the said proposal containing more than 300 words or more than one matters in a single proposal as provided in the proviso of Paragraph One.
A shareholder proposal proposed under Paragraph One for urging a company to promote public interests or fulfill its social responsibilities may still be included in the list of proposals to be discussed at a regular meeting of shareholders by the board of directors.
The company shall, prior to preparing and delivering the shareholders’ meeting notice, inform, by a notice, all the proposal submitting shareholders of the proposal screening results, and shall list in the shareholders’ meeting notice the proposals conforming to the requirements set out in this Article. With regard to the proposals submitted by shareholders but not included in the agenda of the meeting, the cause of exclusion of such proposals and explanation shall be made by the board of directors at the shareholders’ meeting to be convened.
The responsible person of a company who violates the provisions set out in Paragraph Two, Four or the preceding Paragraph shall be imposed with a fine in an amount not less than NT$10,000 but not more than NT$50,000; for a public company, the responsible person of a company shall be imposed by the competent authority in charge of securities affairs with a fine in the amount of not less than NT$240, 000 but not more than NT$2,400,000.
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| Article 172-2 | A company may explicitly provide for in its Articles of Incorporation that its shareholders’ meeting can be held by means of visual communication network or other methods promulgated by the central competent authority. Under the circumstances of calamities, incidents, or force majeure, the central competent authority may promulgate a ruling that authorizes a company, which has no above provision in its Articles of Incorporation, within a certain period of time can hold its shareholders’ meeting by means of visual communication network or other promulgated methods.
In case a shareholders’ meeting is proceeded via visual communication network, the shareholders taking part in such a visual communication meeting shall be deemed to have attended the meeting in person.
For the preceding two paragraphs, a public company shall be subject to prescriptions provided for by the competent authority in charge of securities affairs, including the prerequisites, procedures, and other compliance matters.
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| Article 173 | Any or a plural number of shareholder(s) of a company who has (have) continuously held 3% or more of the total number of outstanding shares for a period of one year or a longer time may, by filing a written proposal setting forth therein the subjects for discussion and the reasons, request the board of directors to call a special meeting of shareholders.
If the board of directors fails to give a notice for convening a special meeting of shareholders within 15 days after the filing of the request under the preceding Paragraph, the proposing shareholder(s) may, after obtaining an approval from the competent authority, convene a special meeting of shareholders on his/their own.
A special meeting of shareholders convened in accordance with the provisions set out in the preceding two Paragraphs may appoint an inspector to examine the business and financial condition of the company.
When the board of directors fails or can not convene a shareholders' meeting on account of share transfer or any other causes, the shareholder(s) holding 3% or more of the totle number of outstanding shares of the company may, after obtaining an approval from the competent authority, convene a shareholders' meeting.
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| Article 173-1 | Shareholders continuously holding 50% or more of the total number of outstanding shares of a company for a period of three months or a longer time may convene a special shareholders’ meeting.
The calculation of the holding period and holding number of shares in the preceding paragraph shall be based on the holding at the time of share transfer suspension date in accordance with Paragraph Two or Three of Article 165.
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| Article 174 | Resolutions at a shareholders' meeting shall, unless otherwise provided for in this Act, be adopted by a majority vote of the shareholders present, who represent more than one-half of the total number of voting shares.
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| Article 175 | When the number of shareholders present does not constitute the quorum prescribed in the preceding article, but those present represent one-third or more of the total number of issued shares, a tentative resolution may be passed by a majority of those present. A notice of such tentative resolution shall be given to each of the shareholders, and reconvene a Shareholders’ meeting within one month.
In the aforesaid meeting of shareholders, if the tentative resolution is again adopted by a majority of those present who represent one-third or more of the total number of issued shares, such tentative resolution shall be deemed to be a resolution under the preceding article.
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| Article 175-1 | Shareholders of a company may reach a voting agreement in writing to jointly exercise their voting rights or may form a voting trust where the voting trustee will exercise the voting power based upon the terms and conditions stated in such a written voting trust agreement.
A voting trust cannot be set up as a defense against the company unless the written voting trust agreement referred to in the preceding Paragraph, the name or title, office, residence or domicile of each shareholder, and the total number, kind and amount of shares transferred to the voting trust have been delivered to the company for registration 30 days prior to a shareholders’ meeting or 15 days prior to a special shareholders' meeting.
The two preceding paragraphs shall not apply to a public company.
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| Article 176 | (Deleted)
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| Article 177 | A shareholder may appoint a proxy to attend a shareholders’ meeting in his/her/its behalf by executing a power of attorney stating therein the scope of power authorized to the proxy. However, a public company shall comply with the provisions otherwise stipulated by the competent authority in charge of securities affairs.
Except for trust enterprises or stock agencies approved by the competent authority, when a person who acts as the proxy for two or more shareholders, the number of voting power represented by him/her shall not exceed 3% of the total number of voting shares of the company, otherwise, the portion of excessive voting power shall not be counted.
A shareholder may only execute one power of attorney and appoint one proxy only, and shall serve such written proxy to the company no later than 5 days prior to the meeting date of the shareholders’ meeting. In case two or more written proxies are received from one shareholder, the first one received by the company shall prevail; unless an explicit statement to revoke the previous written proxy is made in the proxy which comes later.
After the service of the power of attorney of a proxy to the company, in case the shareholder issuing the said proxy intends to attend the shareholders’ meeting in person or to exercise his/her/its voting power in writing or by way of electronic transmission , a proxy rescission notice shall be filed with the company two days prior to the date of the shareholders’ meeting as scheduled in the shareholders’ meeting notice so as to rescind the proxy at issue, otherwise, the voting power exercised by the authorized proxy at the meeting shall prevail.
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| Article 177-1 | A company whose shareholders may exercise their voting power in writing or by way of electronic transmission in a shareholders' meeting shall describe in the shareholders’ meeting notice the method of exercising their voting power. However, a public company satisfied with the conditions in terms of company’s scale, shareholder number, shareholder structure and other essential factors stipulated by the competent authority in charge of securities affairs shall adopt the electronic transmission as one of the methods for exercising the voting power.
A shareholder who exercises his/her/its voting power at a shareholders meeting in writing or by way of electronic transmission as set forth in the preceding Paragraph shall be deemed to have attended the said shareholders’ meeting in person, but shall be deemed to have waived his/her/its voting power in respective of any extemporary motion(s) and/or the amendment(s) to the contents of the original proposal(s) at the said shareholders’ meeting.
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| Article 177-2 | In case a shareholder elects to exercise his/her/its voting power in writing or by way of electronic transmission, his/her/its declaration of intention shall be served to the company two days prior to the scheduled meeting date of the shareholders' meeting, whereas if two or more declarations of the same intention are served to the company, the first declaration of such intention received shall prevail; unless an explicit statement to revoke the previous declaration is made in the declaration which comes later.
In case a shareholder who has exercised his/her/its voting power in writing or by way of electronic transmission intends to attend the shareholders' meeting in person, he/she/it shall, two days prior to the meeting date of the scheduled shareholders' meeting and in the same manner previously used in exercising his/her/its voting power, serve a separate declaration of intention to rescind his/her/its previous declaration of intention made in exercising the voting power under the preceding Paragraph Two. In the absence of a timely rescission of the previous declaration of intention, the voting power exercised in writing or by way of electronic transmission shall prevail.
In case a shareholder has exercised his/her/its voting power in writing or by way of electronic transmission, and has also authorized a proxy to attend the shareholders' meeting in his/her/its behalf, then the voting power exercised by the authorized proxy for the said shareholder shall prevail.
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| Article 177-3 | Where a company offering its shares to be public convenes a shareholders' meeting, the company shall prepare a manual for shareholders' meeting proceedings and shall disclose such manual together with other information related to the said shareholders' meeting in a public notice to be published prior to the scheduled meeting date of that shareholders' meeting.
Regulations governing the time and manner for publishing the public notice as required in the preceding Paragraph, the particulars to be contained in the manual for shareholders' meeting, and other governing rules shall be prescribed by the government authority in charge of securities affairs.
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| Article 178 | A shareholder who has a personal interest in the matter under discussion at a meeting, which may impair the interest of the company, shall not vote nor exercise the voting right on behalf of another shareholder.
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| Article 179 | Except in the circumstances otherwise provided for in this Act, a shareholder shall have one voting power in respect of each share in his/her/its possession.
The shares shall have no voting power under any of the following circumstances:
- the share(s) of a company that are held by the issuing company itself in accordance with the laws;
- the shares of a holding company that are held by its subordinate company, where the total number of voting shares or total shares equity held by the holding company in such a subordinate company represents more than one half of the total number of voting shares or the total shares equity of such a subordinate company; or
- the shares of a holding company and its subordinate company(ies) that are held by another company, where the total number of the shares or total shares equity of that company held by the holding company and its subordinate company(ies) directly or indirectly represents more than one half of the total number of voting shares or the total share equity of such a company.
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| Article 180 | The shares held by shareholders having no voting right shall not be counted in the total number of issued shares while adopting a resolution at a meeting of shareholders.
In passing a resolution at a shareholders' meeting, shares for which voting right cannot be exercised as provided in Article 178 shall not be counted in the number of votes of shareholders present at the meeting.
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| Article 181 | When the government or a juristic person is a shareholder, its proxy shall not be limited to one person, provided that the voting right that may be exercised shall be calculated on the basis of the total number of voting shares it holds.
In case the aforesaid proxies are two persons or more, they shall exercise their voting right jointly.
If a shareholder of a company whose shares have been issued in public holds shares for others, such shareholder may exercise his/her/its voting power separately.
Regulations governing the qualifications, scope, methods of exercise, operating procedures and other matters for compliance with respect to exercising voting power separately in the preceding paragraph shall be prescribed by the competent authority in charge of securities affairs.
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| Article 182 | The provisions of Article 172 shall not apply where a meeting of shareholders resolves to postpone the meeting for not more than, or to reconvene the meeting within, five days.
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| Article 182-1 | For a shareholders' meeting convened by the board of directors, the chairman of the meeting shall be appointed in accordance with the provisions of Paragraph Three, Article 208 of this Act; where as for a shareholders' meeting convened by any other person having the convening right, he/she shall act as the chairman of that meeting provided, however, that if there are two or more persons having the convening right, the chairman of the meeting shall be elected from among themselves.
A company shall establish the rules governing the proceedings of meetings. During the session of a shareholders' meeting, if the chairman declares the adjournment of the meeting in a manner in violation of such rules governing the proceedings of meetings, a new chairman of the meeting may be elected by a resolution to be adopted by a majority of the voting rights represented by the shareholders attending the said meeting to continue the proceedings of the meeting.
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| Article 183 | Resolutions adopted at a shareholders' meeting shall be recorded in the minutes of the meeting, which shall be affixed with the signature or seal of the chairman of the meeting and shall be distributed to all shareholders of the company within twenty (20) days after the close of the meeting.
The preparation and distribution of the minutes of shareholders' meeting as required in the preceding Paragraph may be effected by means of electronic transmission.
With regard to a company offering its shares to the public, the distribution of the minutes of shareholders' meeting as required in Paragraph One of this Article may be effected by means of a public notice.
The minutes of shareholders' meeting shall record the date and place of the meeting, the name of the chairman, the method of adopting resolutions, and a summary of the essential points of the proceedings and the results of the meeting. The minutes shall be kept persistently throughout the life of the company.
The attendance list bearing the signatures of shareholders present at the meeting and the powers of attorney of the proxies shall be kept by the company for a minimum period of at least one year. However, if a lawsuit has been instituted by any shareholder in accordance with the provisions of Article 189 hereof, the minutes of the shareholders' meeting involved shall be kept by the company until the legal proceedings of the foregoing lawsuit have been concluded.
The director authorized to represent the company who violates the provisions of Paragraph I, Paragraph IV or the preceding Paragraph of this Article shall be imposed with a fine of not less than NT$ 10,000 but not more than NT$ 50,000.
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| Article 184 | The shareholders' meeting may examine the statements and books prepared and submitted by the board of directors and the auditing reports submitted by the supervisors, and may decide, by resolution, the surplus earning distribution and deficit off-setting plan.
In order to conduct the examination set forth in the preceding Paragraph, the shareholders' meeting may select and appoint inspectors as required.
Any person who commits any act of impeding, refusing or evading the examination set forth in the preceding two Paragraphs shall be imposed with a fine of not less than NT$ 20,000 but not more than NT$ 100.000.
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| Article 185 | A company shall not do any of the following acts without a resolution adopted by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares:
- Enter into, amend, or terminate any contract for lease of the company’s business in whole, or for entrusted business, or for regular joint operation with others;
- Transfer the whole or any essential part of its business or assets; or
- Accept the transfer of another’s whole business or assets, which has great bearing on the business operation of the company.
For a company which has had its share certificates publicly issued, if the total number of shares represented by the shareholders present at shareholders’ meeting is not sufficient to meet the criteria specified in the preceding paragraph, the resolution to be made thereto may be adopted by two-thirds or more of the attending shareholders who represent a majority of the total number of its outstanding shares.
Where stricter criteria for the total number of attending shareholders and for the number of votes required to adopt a resolution at a shareholders’ meeting referred to in the preceding two paragraphs are specified in the Articles of Incorporation of the company, such stricter criteria shall govern.
A proposal for doing any of the acts specified in Paragraph One shall be submitted by the Board of Directors by a resolution adopted by a majority vote at a meeting of the Board of Directors attended by over two-thirds of the directors
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| Article 186 | A shareholder, who has served a notice in writing to the company expressing his intention to object to such an act prior to the adoption of a resolution at a shareholders' meeting in accordance with the provisions of the preceding article, and also has raised his objection at the shareholders' meeting, may request the company to buy back all of his shares at the then prevailing fair price, provided, however, that this shall not apply if, at the time of adopting a resolution under Item 2, Paragraph 1 of the preceding article, the shareholders' meeting also adopts a resolution for dissolution.
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| Article 187 | The request mentioned in the preceding article shall be brought forth in writing within twenty days after the adoption of resolution under Article 185, stating therein the kinds and number of shares.
In case an agreement on the price of shares is reached between the shareholder and the company, the company shall pay for the shares within ninety days from the date on which the resolution was adopted. In case no agreement is reached within sixty days of the date on which the resolution was adopted in accordance with Article 185, the shareholder may, within thirty days from the date on which the sixty-day period expired, apply to court for a ruling on the price.
The company shall pay legal interest on the price ruled by the court from the date of expiration of the period referred to in Paragraph 2. The payment of price shall be made at the same time against the delivery of share certificates, and the transfer of such shares shall be effective at the time when payment is made.
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| Article 188 | The request of a shareholder as provided in Article 186 shall lose its effect at the time when the company calls off its act as specified in Article 185, paragraph 1.
The same shall apply where a shareholder fails to make request within the period prescribed in Paragraphs 1 and 2 of the preceding article.
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| Article 189 | In case the procedure for convening a shareholders' meeting or the method of adopting resolutions thereat is in contrary to any law, ordinance or the company's Articles of Incorporation, a shareholder may, within 30 days from the date of adoption of the said resolution, enter a petition in the court for annulment of such resolution.
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| Article 189-1 | Upon receipt of the petition for annulment of a resolution filed under the preceding Article, if the court considers that the fact of violation described in the said petition is insignificant and will do nothing to the prejudice of the resolution, the court may dismiss such petition.
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| Article 190 | In case a resolution already registered is annulled by an irrevocable judgment of a court, the authority shall annul the registration upon notice by the court or application of an interested party.
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| Article 191 | In case the substance of a resolution adopted at a meeting of shareholders is contrary to law or ordinance or the company's Articles of Incorporation, the resolution shall be null and void.
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Section 4.Directors and Board of Directors
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| Article 192 | The board of directors of a company shall have at least three directors who shall be elected by the shareholders’ meeting from among the persons with disposing capacity.
A company may choose not to have the board of directors but to have one or two directors. For a company with only one director, such director shall be the chairman and the functional duties and powers of the board of directors of such company shall be exercised by such director, and the provisions governing the board of directors as set out in this Act shall not apply to such company. The provisions governing the board of directors as set out in this Act shall apply mutatis mutandis to a company with two directors.
For a public company, if the percentage of shareholdings of all the directors selected in accordance with Paragraph One is subject to the provisions separately prescribed by the competent authority in charge of securities affairs, such provisions shall prevail.
The provisions set out in Article 15-2 and Article 85 of The Civil Code shall not apply to the disposing capacity set forth in Paragraph One of this Article.
Unless otherwise provided for in this Act, the relations between the company and its directors shall be governed by the provisions of the Civil Code pertaining to the mandate.
The provisions set out in Article 30 hereof shall apply mutatis mutandis to the directors of a company.
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| Article 192-1 | In case a candidates nomination system is adopted by a company for election of the directors of the company, the adoption of such system shall be expressly stipulated in the Articles of Incorporation of the company; and the shareholders shall elect the directors from among the nominees listed in the roster of director candidates. However, a public company satisfied with the conditions in terms of company’s scale, shareholder number, shareholder structure and other essential factors stipulated by the competent authority in charge of securities affairs shall adopt such candidates nomination system and such adoption shall be expressly stipulated in the Articles of Incorporation of the company.
The company shall, prior to the share transfer suspension date dedicated before the meeting date of a shareholders’ meeting, announce in a public notice, the period for accepting the nomination of director candidates, the quota of directors to be elected, the place designated for accepting the roster of director candidates nominated, and other necessary matters. The length of the period for accepting the nomination of director candidates shall not be shorter than ten (10) days.
Any shareholder holding 1% or more of the total number of outstanding shares issued by the company may submit to the company in writing a roster of director candidates, provided that the total number of director candidates so nominated shall not exceed the quota of the directors to be elected. This restrictive condition shall also be applicable to the roster of director candidates nominated by the board of directors of the company.
The roster of director candidates submitted by a shareholder as prescribed in the preceding Paragraph shall describe the name, education background and past work experience of the director candidates.
The board of directors or other authorized conveners of shareholders’ meetings shall examine and/or screen the data and information of each director candidate nominated; and shall, unless under any of the following circumstances, include all qualified director candidates in the final roster of director candidates accordingly:
- Where the roster of director candidates is submitted by the nominating shareholder beyond the deadline fixed for accepting such candidates roster;
- Where the number of shares of the company being held by the nominating shareholder is less than 1% of the total number of outstanding shares of the company at the time when the share transfer registration is suspended by the company in accordance with the provisions set out in Paragraph II or Paragraph III, Article 165 of this Act;
- Where the number of director candidates nominated exceeds the quota of the directors to be elected; or
- Where the roster of director candidates submitted by a shareholder fails to describe the name, education background and past work experience of the director candidates.
The company shall, no later than 25 days prior to the scheduled meeting date of a regular shareholders’ meeting or no later than 15 days prior to the scheduled meeting date of a special shareholders’ meeting, have the roster of director candidates and their education background and past work experience published in a public notice; for a public company, such a public notice shall be published no later than 40 days prior to the scheduled meeting date of a regular shareholders’ meeting or no later than 25 days prior to the scheduled meeting date of a special shareholders’ meeting.
The responsible person or other authorized conveners of a company who violates the provisions set out in Paragraph Two or the preceding two Paragraphs of this Article shall be imposed with a fine of not less than NT$10,000, but not more than NT$50,000; for a public company, the responsible person or other authorized conveners of a company shall be imposed with a fine by the competent authority in charge of securities affairs of not less than NT$240,000 but not more than NT$2,400,000.
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| Article 193 | The Board of Directors, in conducting business, shall act in accordance with laws and ordinances, the Articles of Incorporation, and the resolutions adopted at the meetings of shareholders.
Where any resolution adopted by the Board of Directors contravenes the preceding Paragraph, thereby causing loss or damage to the company, all directors taking part in the adoption of such resolution shall be liable to compensate the company for such loss or damage; however, those directors whose disagreement appears on record or is expressed in writing shall be exempted from liability.
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| Article 193-1 | A company may obtain directors liability insurance with respect to liabilities resulting from exercising their duties during their terms of directorship.
A company shall report the insured amount, coverage, premium rate, and other important contents of the directors liability insurance it has obtained or renewed for directors, at the most recent board meeting.
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| Article 194 | In case the board of directors decide, by resolution, to commit any act in violation of any law, ordinance or the company's Articles of Incorporation, any shareholder who has continuously held the shares of the company for a period of one year or longer may request the board of directors to discontinue such act.
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| Article 195 | The term of office of a director shall not exceed three years; but he/she may be eligible for re-election.
In case no election of new directors is effected after expiration of the term of office of existing directors, the term of office of out-going directors shall be extended until the time new directors have been elected and assumed their office. However, the competent authority may, ex officio, order the company to elect new directors within a given time limit; and if no re-election is effected after expiry of the given time limit, the out-going directors shall be discharged ipso facto from such expiration date.
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| Article 196 | The remuneration of directors, if not prescribed in the Articles of Incorporation, shall be determined by a meeting of shareholders and cannot be ratified by a meeting of shareholders.
The provision set forth in Article 29, Paragraph 2 hereof shall apply mutatis mutandis to the directors of a company.
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| Article 197 | Each director shall, after having been elected, declare to the competent authority the number and amount of the shares of the company being held by him/her at the time when he/she is elected. In case a director of a company whose shares are issued to the public that has transferred, during the term of office as a director, more than one half of the company's shares being held by him/her at the time he/she is elected, he/she shall, ipso facto, be discharged from the office of director.
If the number of company's shares held by a director is increased or reduced during his/her term of office as a director, he/she shall declare such change to the competent authority and shall place a public notice of such a fact.
If any director of a company whose shares are issued to the public, after having been elected and before his/her inauguration of the office of director, has transferred more than one half of the total number of shares of the company he/she holds at the time of his/her election as such; or had transferred more than one half of the total number of shares he/she held within the share transfer prohibition period fixed prior to the convention of a shareholders' meeting, then his/her election as a director shall become invalid.
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| Article 197-1 | Upon creation or cancellation of a pledge on the company's shares held by a director, a notice of such action shall be given to the company, and the company shall, in turn and within 15 days after such pledge creation/ cancellation date, have the change of pledge over such shares reported to the competent authority and declared in a public notice; unless otherwise provided for in any rules or regulations separately prescribed by the authority in charge of securities affairs.
In case a director of a company whose shares are issued to the public has created a pledge on the company’s shares more than half of the company’s shares being held by him/her/it at the time he/she/it is elected, the voting power of the excessive portion of shares shall not be exercised and the excessive portion of shares shall not be counted in the number of votes of shareholders present at the meeting.
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| Article 198 | In the process of electing directors at a shareholders' meeting, the number of votes exercisable in respect of one share shall be the same as the number of directors to be elected, and the total number of votes per share may be consolidated for election of one candidate or may be split for election of two or more candidates. A candidate to whom the ballots cast represent a prevailing number of votes shall be deemed a director elect.
The provision of Article 178 hereof shall not apply to the voting power referred to in the preceding Paragraph.
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| Article 199 | A director may be discharged at any time by a resolution adopted at a shareholders' meeting provided, however, that if a director is discharged during the term of his/her office as a director without good cause shown, the said director may make a claim against the company for any and all damages sustained by him/her as a result of such discharge.
A resolution required for discharging a director under the preceding Paragraph may be adopted only by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares by the company.
For a company whose shares are issued to the public, if the total number of shares represented by the shareholders present at a shareholders' meeting is less than the quorum set forth in the preceding Paragraph, the resolution required for discharging a director may be adopted by two-thirds (2/3) of the total votes of the shareholders present at the shareholders' meeting attended by the shareholders representing a majority of the total number of outstanding shares issued by the company.
Where higher requirements of the quorum of a shareholders' meeting and the number of votes are specified in the Articles of Incorporation of a company, such higher requirements shall prevail.
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| Article 199-1 | Where all directors of a company are re-elected, prior to the expiration of the term of office of existing directors, and in the absence of a resolution that existing directors will not be discharged until the expiry of their present term of office, all existing directors shall be deemed discharged in advance.
The aforesaid re-election shall be attended by shareholders who represent more than one-half of the total number of issued and outstanding shares.
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| Article 200 | In case a director has, in the course of performing his/her duties, committed any act resulting in material damages to the company or in serious violation of applicable laws and/or regulations, but not discharged by a resolution of the shareholders' meeting, the shareholder(s) holding 3% or more of the total number of outstanding shares of the company may, within 30 days after that shareholders' meeting, institute a lawsuit in the court for a judgment in respect of such matter.
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| Article 201 | When the number of vacancies in the board of directors of a company equals to one third of the total number of directors, the board of directors shall call, within 30 days, a special meeting of shareholders to elect succeeding directors to fill the vacancies. However, in the case of a company whose shares are issued to the public, the special meeting of shareholders for electing succeeding directors shall be convened by the board of directors within 60 days.
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| Article 202 | Business operations of a company shall be executed pursuant to the resolutions to be adopted by the board of directors, except for the matters the execution of which shall be effected pursuant the resolutions of the shareholders' meeting as required by this Act or the Articles of Incorporation of the company.
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| Article 203 | The first meeting of each term of the board of directors shall be convened by the director who received a ballot representing the largest number of votes at the election of directors within 15 days after the re-election. However, in case the re-election of directors was conducted prior to the expiration of the term of office of the directors of the preceding term, and a resolution was adopted not to discharge the directors of the preceding term until the expiration of the term of their offices as directors, the first meeting of the newly elected directors shall be convened within 15 days after expiration of the term of office of the directors of the preceding term.
Where directors are elected prior to the expiration of the term of office of the directors of the preceding term, and a resolution is adopted not to discharge the directors of the preceding term until the expiration of the term of office of the preceding term, the chairman, the vice chairman and the managing directors of the newly elected board of directors may be carried out prior to the expiration of the term of office of the directors of the preceding term, free from the binding of the provisions of the preceding Paragraph.
Where the number of directors attending the first meeting of the newly elected board of directors is less than the minimum quorum of the meeting of the board of directors convened for election of the chairman and the managing directors of the board of directors, then the original convener shall resume the meeting within 15 days to conduct the election, and may apply the resolution adopting method set forth in Article 206 of this Act.
In case the director elect receiving the a ballot representing the largest number of votes fails to convene the meeting of the board of directors within the time limit set out in Paragraph One or the preceding Paragraph of this Article, then the majority or more of the directors elect may convene the meeting on their own.
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| Article 203-1 | Meetings of the board of directors shall be convened by the chairman of the board of directors.
The majority or more of the directors may, by filing a written proposal setting forth therein the subjects for discussions and the reasons, request the chairman of the board of directors to convene a meeting of the board of directors.
If the chairman of the board of directors fails to convene a meeting of board of directors within 15 days after the filing of the request under the preceding paragraph, the proposing directors may convene a meeting of board of directors on their own.
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| Article 204 | In calling a meeting of the board of directors, a notice shall be given to each director and supervisor no later than 3 days prior to the scheduled meeting date. However, where there is any longer days required in the Articles of Incorporation, such longer days shall prevail.
The time limit on giving a notice to the directors and supervisors for convening a meeting of board of directors in a public company shall be prescribed by the competent authority in charge of securities affairs and the preceding paragraph shall not apply to a public company.
In the case of emergency, a meeting of the board of directors may be convened at any time.
The notice set forth in the preceding three Paragraph may be effected by means of electronic transmission, after obtaining a prior consent from the recipient(s) thereof.
In calling a meeting of the board of directors, a notice shall set forth therein the subject(s) to be discussed at the meeting
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| Article 205 | Each director shall attend the meeting of the board of directors in person, unless as otherwise provided for in the Articles of Incorporation that a director may be represented by another director.
In case a meeting of the board of directors is proceeded via visual communication network, then the directors taking part in such a visual communication meeting shall be deemed to have attended the meeting in person.
In case a director appoints another director to attend a meeting of the board of directors in his/her behalf, he/she shall, in each time, issue a written proxy and state therein the scope of authority with reference to the subjects to be discussed at the meeting.
A director may accept the appointment to act as the proxy referred to in the preceding Paragraph of one other director only.
A company may explicitly provide for in its Articles of Incorporation that if it is agreed by all directors, any action to be taken at a meeting of the board of directors may be taken, without a meeting, by written consents to exercise their voting power.
A meeting of the board of directors held in accordance with the preceding paragraph shall be deemed to have been convened; the directors who exercise their voting power by written consents shall be deemed to have attend the meeting in person.
The preceding two paragraphs shall not apply to a public company.
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| Article 206 | Unless otherwise provided for in this Act, resolutions of the Board of Directors shall be adopted by a majority of the directors at a meeting attended by a majority of the directors.
A director who has a personal interest in the matter under discussion at a board meeting shall explain to the board meeting the essential contents of such personal interest.
Where the spouse, a blood relative within the second degree of kinship of a director, or any company which has a controlling or subordinate relation with a director has interests in the matters under discussion in the meeting of the preceding paragraph, such director shall be deemed to have a personal interest in the matter.
The provisions of Article 178 and Article 180, paragraph 2 shall apply mutatis mutandis to the resolutions set forth in Paragraph 1.
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| Article 207 | Minutes shall be taken of the proceedings of the meeting of the board of directors.
The provisions of Article 183 shall apply mutatis mutandis to the aforesaid minutes.
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| Article 208 | In case a company has no managing directors, the board of directors shall elect a chairman of the board directors from among the directors by a majority vote at a meeting attended by over two-thirds of the directors, and may also elect in the same manner a vice chairman of the board in accordance with the provisions of the Articles of Incorporation.
In case a company has managing directors, the managing directors shall be elected from among the directors in accordance with the manner set forth in the preceding Paragraph provided that the number of managing directors shall not be less than three persons but not more than one-third of the total number of directors. The chairman or the vice chairman of the board shall be elected from the managing directors in accordance with the same manner set forth in the preceding Paragraph.
The chairman of the board of directors shall internally preside the shareholders' meeting, the meeting of the board of directors, and the meeting of the managing directors; and shall externally represent the company. In case the chairman of the board of directors is on leave or absent or can not exercise his power and authority for any cause, the vice chairman shall act on his behalf. In case there is no vice chairman, or the vice chairman is also on leave or absent or unable to exercise his power and authority for any cause, the chairman of the board of directors shall designate one of the managing directors, or where there is no managing directors, one of the directors to act on his behalf. In the absence of such a designation, the managing directors or the directors shall elect from among themselves an acting chairman of the board of directors.
During the recess of the board of directors, the managing directors shall regularly exercise the power and authority of the board of directors in accordance with the provisions of laws and regulations and the Articles of Incorporations of the company, and the resolutions adopted by the shareholders' meetings and the meetings of the board of directors by conferences to be called from time to time by the chairman of the board of directors; with the resolutions to be adopted by a majority of managing directors present at such conferences attended by a majority of managing directors.
The provisions set out in Article 57 and Article 58 hereof shall apply mutatis mutandis to directors representing the company.
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| Article 208-1 | In case the board of directors fails or is unable to exercise its power and authority to the extent which is likely to cause damage to the company, the court may, at the petition of interested party or parties or a public prosecutor, appoint one or more temporary manager to exercise the power and authority of the chairman of the board of directors and the board of directors instead provided, however, that he/she shall not commit any act unfavorable to the company.
Upon appointment of the temporary manager under the preceding Paragraph, the court shall request the competent authority to make appropriate registration of such appointment.
Upon discharge of the temporary manager appointed hereunder, the court shall request the competent authority to cancel the registration of his appointment.
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| Article 209 | A director who does anything for himself or on behalf of another person that is within the scope of the company's business, shall explain to the meeting of shareholders the essential contents of such an act and secure its approval.
The aforesaid approval shall be given upon a resolution adopted by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares.
For a company whose share certificates have been publicly issued, if the total number of shares represented by shareholders present at a shareholders' meeting is not sufficient to meet the criteria specified in the preceding paragraph, the resolution may be adopted by a large majority of two thirds of the voting powers of the shareholders present at a shareholders' meeting who present a majority of the total number of issued shares.
Where stricter criteria for the total number of shares represented by the attending shareholders and the required number of votes at the shareholders' meeting set forth in the preceding two paragraphs are specified in the Articles of Incorporation, such stricter criteria shall govern.
In case a director does anything for himself or on behalf of another person in violation of the provisions of Paragraph 1, the meeting of shareholders may, by a resolution, consider the earnings in such an act as earnings of the company unless one year has lapsed since the realization of such earnings.
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| Article 210 | Subject to the provisions otherwise provided for by the competent authority in charge of securities affairs, the board of directors shall keep at the head office of the company copies of the Articles of Incorporation, the minutes of every meeting of the shareholders and the financial statements, and shall keep at the head office of the company or the business office of its shareholder service agent the shareholders roster and the counterfoil of corporate bonds issued by the company.
Any shareholder and any creditor of a company may request at any time, by submitting evidentiary document(s) to show his/her interests involved and indicating the scope of interested matters, an access to inspect, transcribe and to make copies of the Articles of Incorporation and accounting books and records referred to in the preceding paragraph; if the Articles of Incorporation and accounting books and records are kept in a shareholder service agent, the company shall make such agent to provide with the access.
The director representing a company who violates the provisions set out in Paragraph One hereinabove by not making the Articles of Incorporation and accounting books and records available shall be imposed with a fine of not less than NT$ 10,000 but not more than NT$ 50,000; for a public company, the director representing a company shall be imposed with a fine by the competent authority in charge of securities affairs of not less than NT$240,000 but not more than NT$2,400,000.
The director representing a company who violates the provisions set out in Paragraph Two by refusing the inspection, transcription or copying of relevant information or fails to make the shareholder service agent to provide with the access without good cause shown shall be imposed with a fine of not less than NT$ 10,000 but not more than NT$ 50,000; for a public company, the director representing a company shall be imposed with a fine by the competent authority in charge of securities affairs of not less than NT$240,000 but not more than NT$2,400,000.
Under the circumstances of the preceding two paragraphs, the competent authority or the competent authority in charge of securities affairs shall notify the company to rectify its law violating act within a given time limit; and if the company fails to take corrective action beyond the given time limit, the competent authority or the competent authority in charge of securities affairs shall continually notify the company to rectify its law violating act within a given time limit and impose the fine consecutively for each time of non-compliance until the law violating act is rectified.
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| Article 210-1 | The board of directors or other authorized conveners of shareholders’ meetings may require a company or its shareholder service agent to provide with the roster of shareholders.
The director representing a company who refuses to provide with the roster of shareholders shall be imposed with a fine of not less than NT$ 10,000 but not more than NT$ 50,000; for a public company, the director representing a company shall be imposed with a fine by the competent authority in charge of securities affairs of not less than NT$240,000 but not more than NT$2,400,000.
A shareholder service agent who refuses to provide with the roster of shareholders shall be imposed with a fine by the competent authority in charge of securities affairs of not less than NT$240,000 but not more than NT$2,400,000.
Under the circumstances of the preceding two paragraphs, the competent authority or the competent authority in charge of securities affairs shall notify the company to rectify its law violating act within a given time limit; and if the company fails to take corrective action beyond the given time limit, the competent authority or the competent authority in charge of securities affairs shall continually notify the company to rectify its law violating act within a given time limit and impose the fine consecutively for each time of non-compliance until the law violating act is rectified.
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| Article 211 | In case the loss incurred by a company aggregates to one half of its paid-in capital, the board of directors shall convene and make a report to the most recent meeting of shareholders.
Subject to the provisions set out in Article 282 of this Act, in case the assets of a company is insufficient to set off its liabilities, the board of directors shall apply to the court for pronouncement of its bankruptcy.
The director(s) authorized to represent the company who has (have) violated the provisions of the preceding two Paragraphs shall be imposed with a fine of not less than NT$ 20,000 but not more than NT$ 100,000.
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| Article 212 | In case the shareholders' meeting of a company resolves to institute an action against a director, the company shall, within 30 days from the date of such resolution, institute the action.
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| Article 213 | In case of a lawsuit between the company and a director, the supervisor shall act on behalf of the company, unless otherwise provided by law; and the meeting of shareholders may also appoint some other person to act on behalf of the company in a lawsuit.
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| Article 214 | Shareholder(s) who has/have been continuously holding 1% or more of the total number of the outstanding shares of the company over six months may request in writing the supervisors of the company to institute, for the company, an action against a director of the company.
In case the supervisors fails to institute an action within 30 days after having received the request made under the preceding Paragraph, then the shareholders filing such request under the preceding Paragraph may institute the action for the company; and under such circumstance, the court may, at the petition of the defendant, order the suing shareholders to furnish an appropriate security. In case the suing shareholders become the loser in that lawsuit and thus causing any damage to the company, the suing shareholders shall be liable for indemnifying the company for such damage.
The shareholder(s) who initiate(s) the action in accordance with the preceding paragraph may temporarily be exempted from paying the portion of the court costs in excess of NT$600,000 if the amount of court costs collected is more than NT$ 600,000.
In the action initiated in accordance with the provision of Paragraph Two, the court may, on motion, appoint an attorney as an advocate for the plaintiff.
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| Article 215 | Where a lawsuit instituted under paragraph 2 of the preceding article is found by a final judgment to be based on facts apparently untrue, the shareholders who instituted the action shall be liable to compensate the defendant director for loss or damage resulting from such an action.
Where a lawsuit instituted under paragraph 2 of the preceding article is found by a final judgment to be based on facts apparently true, the defendant director shall be liable to compensate the shareholders who instituted the action for loss or damage resulting from such an action.
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Section 5.Supervisors
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| Article 216 | Supervisors of a company shall be elected by the meeting of shareholders, among them at least one supervisor shall have a domicile within the territory of the Republic of China.
For a company whose shares are issued to the public, there must be two or more supervisors to be elected in accordance with the provision of the preceding Paragraph, and the total shareholdings of all supervisors shall meet the requirement as separately specified by the competent authority in charge of securities affairs, if any.
The relation between the company and its supervisors shall be subject to the provisions governing the mandate as stipulated in the Civil Code.
The provisions set out in Article 30 and Paragraph One and Paragraph Four regarding the disposing capacity of Article 192 of this Act shall apply mutatis mutandis to the supervisors.
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| Article 216-1 | Where the candidates nomination system is adopted by a company in its Articles of Incorporation for election of supervisors, the provisions set out in Paragraphs One to Six of Article 192-1 of this Act shall apply mutatis mutandis.
The responsible person or other authorized conveners of a company who violates the provisions set out in Paragraphs Two, Five or Six of Article 192-1 as apply mutatis mutandis in the preceding paragraph shall be imposed with a fine of not less than NT$10,000, but not more than NT$50,000; for a public company, the responsible person or other authorized conveners of a company shall be imposed with a fine by the competent authority in charge of securities affairs of not less than NT$240,000 but not more than NT$2,400,000.
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| Article 217 | The term of office of a supervisor shall not exceed three years, but he may be eligible for re-election.
In case election of new supervisors can not be effected in time after expiration of the term of office of existing supervisors, the existing supervisor shall continue to perform their duties until the new supervisors elect has assumed their office as supervisors. However, the competent authority may order, ex officio, the company to conduct the re-election of supervisors within a given time limit. If election of new supervisors is still not effected, the existing supervisors shall be discharged, ipso facto, upon expiry of the time limit hereinabove fixed by the competent authority.
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| Article 217-1 | In case all supervisors of a company are discharged, the board of directors shall, within 30 days, convene a special meeting of shareholders to elect new supervisors. However, for a company whose shares are issued to the public, the special meeting of shareholders for election of supervisors shall be convened by the board of directors within 60 day.
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| Article 218 | Supervisors shall supervise the execution of business operations of the company, and may at any time or from time to time investigate the business and financial conditions of the company, inspect, transcribe or make copies of the accounting books and documents, and request the board of directors or managerial personnel to make reports thereon.
In performing their functional duties under the preceding Paragraph, the supervisors may appoint, on behalf of the company, a practicing lawyer and a certified public accountant to conduct the examination.
The director representing a company who violates Paragraph One by evading, impeding, or refusing the examination to be conducted by supervisors shall be imposed with a fine of not less than NT$ 20,000 but not more than NT$ 100,000; for a public company, the director representing a company shall be imposed with a fine by the competent authority in charge of securities affairs of not less than NT$240,000 but not more than NT$2,400,000.
Under the circumstances of the preceding paragraph, the competent authority or the competent authority in charge of securities affairs shall notify the company to rectify its law violating act within a given time limit; and if the company fails to take corrective action beyond the given time limit, the competent authority or the competent authority in charge of securities affairs shall continually notify the company to rectify its law violating act within a given time limit and impose the fine consecutively for each time of non-compliance until the law violating act is rectified.
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| Article 218-1 | When a director discovers the possibility that the company will suffer substantial damage, he shall report to the supervisor immediately.
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| Article 218-2 | Supervisors of a company may attend the meeting of the board of directors to their opinions.
In case the board of directors or any director commits any act, in carrying out the business operations of the company, in a manner in violation of the laws, regulations, the Articles of Incorporation or the resolutions of the shareholders' meeting, the supervisors shall forthwith advise, by a notice, to the board of directors or the director, as the case may be, to cease such act.
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| Article 219 | Supervisors shall audit the various statements and records prepared for submission to the shareholders' meeting by the board of directors, and shall make a report of their findings and opinions at the meeting of shareholders.
In performing their functional duties under the preceding Paragraph, the supervisors may appoint a certified public accountant to conduct the auditing in their behalf.
Supervisors who violated the preceding Paragraph by making false report shall each be imposed with a fine in an amount not more than NT$ 60,000.
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| Article 220 | Subject to the condition that the board of directors does not or is unable to convene a meeting of shareholders, the supervisors may, for the benefit of the company, call a meeting of shareholders when it is deemed necessary.
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| Article 221 | Supervisor may each exercise the supervision power individually.
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| Article 222 | A supervisor shall not be concurrently a director, a managerial officer or other staff/employee of the company.
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| Article 223 | In case a director of a company transacts a sales with, or borrows money from or conducts any legal act with the company on his own account or for any other person, the supervisor shall act as the representative of the company.
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| Article 224 | In case a supervisor has, in performing his functional duties, violated the provisions of any law, regulations, or the Articles of Incorporation of the company, or was negligent of his duties and thus causing any damage to the company, he shall be liable for indemnifying the company for such damage.
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| Article 225 | When a meeting of shareholders resolves to institute an action against a supervisor, the company shall institute such action within 30 days from the date of adoption of such resolution.
The person who represents the company in the action instituted under the preceding Paragraph may be appointed by the shareholders' meeting from the persons other than the directors of the company.
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| Article 226 | In case supervisor is liable to compensate the company or a third party and a director is also liable, such supervisor and director shall be joint debtors.
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| Article 227 | The provisions set out in Article 196 to 200, Article 208-1, Article 214 and Article 215 hereof shall apply mutatis mutandis, to the supervisors provided, however, that the request to be submitted to supervisors under Article 214 hereof shall be submitted to the board of director.
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Section 6.Accounting
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| Article 228 | At the close of each fiscal year, the board of directors shall prepare the following statements and records and shall forward the same to supervisors for their auditing not later than the 30th day prior to the meeting date of a general meeting of shareholders:
- the business report;
- the financial statements; and
- the surplus earning distribution or loss off-setting proposals.
The financial statements and records as required in the preceding Paragraph shall be prepared in accordance with the rules prescribed by the central competent authority.
Supervisors may request the board of directors to provide in advance the financial statements and records for auditing as required in Paragraph I hereinabove.
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| Article 228-1 | A company may explicitly provide for in its Articles of Incorporation that the surplus earning distribution or loss off-setting proposal may be proposed at the close of each quarter or each half fiscal year.
The proposal of surplus earning distribution or loss off-setting for the first three quarters or half fiscal year, together with the business report and financial statements, shall be forwarded to supervisors for their auditing, and afterwards be submitted to the board of directors for approval.
A company distributing surplus earning in accordance with the provision of the preceding paragraph shall estimate and reserve the taxes and dues to be paid, the losses to be covered and the legal reserve to be set aside. Where such legal reserve amounts to the total paid-in capital, this provision shall not apply.
A company distributing surplus earning in the form of new shares to be issued by the company in accordance with the provision of Paragraph Two shall follow the provisions of Article 240; if such surplus earning is distributed in the form of cash, it shall be approved by a meeting of the board of directors.
Surplus earning distribution or loss off-setting proposal by a public company in accordance with the provisions of the preceding four paragraphs shall be made based on the financial statements audited or reviewed by a certified public accountant.
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| Article 229 | The statements and records of accounts prepared by the Board of Directors and the report made by the supervisors shall be made available at the head office for inspection at any time by the shareholders, ten days prior to the regular meeting of shareholders. The shareholders may bring their lawyers or certified public accountants for such an inspection.
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| Article 230 | The board of directors shall submit the various financial statements and records prepared by it to the general meeting of shareholders for its ratification; and after the ratification thereof by the general meeting of shareholders, shall distribute to each shareholder the copies of ratified financial statements and the resolutions on the surplus earning distribution and/or loss offsetting.
For a company offering its shares to the public, the distribution of the ratified financial statements and the resolutions on the surplus earning distribution and/or the loss offsetting set forth in the preceding Paragraph may be effected by way of a public notice.
Any creditor of the company may request the company to provide him with the financial statements and records and the resolutions set forth in Paragraph One hereinabove or to allow him to transcribe or make copies thereof.
The director authorized to represent the company who has violated the provisions of Paragraph I of this Article by failing to distribute the financial statement and records and the resolutions shall be imposed with a fine of not less than NT$ 10,000 but not more than NT$ 50,000.
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| Article 231 | Only after all the statements and records of accounts have been approved by the meeting of shareholders shall directors and supervisors be deemed to have been discharged from their liabilities, except in the event of any unlawful conduct on the part of directors or supervisors.
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| Article 232 | A company shall not pay dividends or bonuses, unless its losses shall have been covered and a legal reserve shall have been set aside in accordance with the provisions of this Act.
A company shall not pay dividends or bonuses, if there is no surplus earnings.
The responsible person(s) of a company who violates the provisions of the preceding two Paragraphs by making distribution of dividends and bonuses shall (each) be punished with imprisonment of not more than one year, detention, and a fine in lieu thereof or in addition thereto in an amount of not more than NT$ 60,000.
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| Article 233 | If a company pays dividends and bonuses in violation of the provisions of the preceding article, creditors of the company may request rescission and may also claim for compensation for loss or damage resulted there-from.
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| Article 234 | A company which according to he nature of its business requires more than two years of preparation from the date of its incorporation before it can commence business, may, with the approval of the competent authority, make distribution of dividends in accordance with the provisions of its Articles of Incorporation.
The amount of the aforesaid dividends for distribution may be included as pre-paid dividends under the account of shareholder's equity to be shown in the balance sheet of the company. After commencing its business operation, whenever the total amount of dividends and bonuses to be distributed each time exceeds six per cent (6%) of its paid-in capital, then the amount of such excessive distribution shall be offset against the aforesaid pre-paid dividends.
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| Article 235 | Unless otherwise provided for in this Act, distribution of the dividends and bonuses shall be effected in proportion to the number of shares held by each shareholder accordingly.
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| Article 235-1 | A fixed amount or ratio of profit of the current year distributable as employees’ compensation shall be definitely specified in the Articles of Incorporation. However, the company’s accumulated losses shall have been covered.
The provisions set out in the preceding Paragraph shall not be applicable to the government operated enterprises, except in the case where special approval has been granted by the authority in charge of the government operated enterprise concerned, and a fixed amount or ratio of profit distributable as employees’ compensation has been definitely specified in the Articles of Incorporation.
A company may, by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the preceding two paragraphs distributed in the form of shares or in cash; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.
A company which has the profit distributed to employees in the form of shares by a resolution of the meeting of board of directors in accordance with the provision of the preceding paragraph may resolve, at the same meeting of the board of directors, to distribute the shares by way of new shares to be issued by the company or existing shares to be re-purchased by the company.
Qualification requirements of employees, including the employees of parents or subsidiaries of the company meeting certain specific requirements, entitled to receive shares or cash in accordance with the provisions of Paragraphs One to Three, may be specified in the Articles of Incorporation.
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| Article 236 | (Deleted)
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| Article 237 | A company, when allocating its surplus profits after having paid all taxes and dues, shall first set aside ten percent of said profits as legal reserve. Where such legal reserve amounts to the total paid-in capital, this provision shall not apply.
Aside from the aforesaid legal reserve, the company may, under its Articles of Incorporation or by resolution of the meeting of shareholders, set aside another sum as special reserve.
Responsible persons of the company who fail to set aside legal reserve, in violation of the provisions of Paragraph 1, shall be severally subject to a fine of not less than NT$20,000 but not more than NT$100,000.
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| Article 238 | (Deleted)
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| Article 239 | The legal reserve and the capital reserve shall not be used except for making good the deficit (or loss) of the company; however, this clause shall not apply to the case set forth in Article 241 hereof or as otherwise provided for in the law.
A company shall not use the capital reserve to make good its capital loss, unless the surplus reserve is insufficient to make good such loss.
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| Article 240 | A company may, by a resolution adopted by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares of the company, have the surplus profit distributable as dividends and bonuses in whole or in part distributed in the form of new shares to be issued by the company for such purpose. In case the amount of balance of such distributable surplus profit is less the par value (or a fraction) of one share, it shall be paid in cash.
For a company whose shares are issued to the public, if the total number of shares represented by the shareholders present at a meeting of shareholders is less than the threshold specified in the preceding Paragraph, the resolution may be adopted by a large majority (2/3 or more) vote of the shareholders present at that meeting of shareholders attended by the shareholders representing a majority of the total number of the outstanding shares of the company.
Where a higher threshold of the number of shareholders to be present and the total number of shares represent is required by the Articles of Incorporation of the company, such higher threshold shall prevail.
Except for a company whose shares are issued to the public and which is subject to the provisions otherwise stipulated by the competent authority in charge of securities affairs, the resolution to issue new shares under this Article shall take effect upon close of the shareholders’ meeting whereat the resolution is adopted, and the board of directors shall forthwith notify each shareholder or cause the number of new shares distributable to the shareholder to be recorded under the name of the pledgee(s) of the said shareholder as registered in the shareholders roster.
A public company may explicitly stipulate in the Articles of Incorporation to authorize the distributable dividends and bonuses in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.
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| Article 241 | Where a company incurs no loss, it may, pursuant to a resolution to be adopted by a shareholders’ meeting as required in Paragraphs One to Three of the preceding Article, distribute its legal reserve and the following capital reserve, in whole or in part, by issuing new shares which shall be distributable as dividend shares to its original shareholders in proportion to the number of shares being held by each of them or by cash:
- the income derived from the issuance of new shares at a premium;
- the income from endowments received by the company.
The provisions set out in Paragraph Four and Paragraph Five of the preceding Article shall be applicable mutatis mutandis to the capitalization of reserves to be effected under the preceding Paragraph.
Where legal reserve is distributed by issuing new shares or by cash, only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed.
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| Article 242 | (Deleted)
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| Article 243 | (Deleted)
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| Article 244 | (Deleted)
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| Article 245 | Shareholders who have been continuously holding one per cent of total number of the outstanding shares of a company for a period of six months or longer may apply to the court, together with reasons and supporting evidence, and explain the necessity for appointment of inspector to inspect, within the necessary scope, the current status business operations, the financial accounts, the property, particular items, document and record of a particular transaction of the company.
The court may, when it deems necessary based on the report made by the inspector, order the supervisor(s) of the company to convene a meeting of shareholders.
Any person who evades, impedes, or refuses the inspection to be conducted by the inspector, or the supervisor(s) who fails to convene a meeting of shareholders as ordered by the court shall be imposed with a fine of not less than NT$ 20,000 but not more than NT$ 100,000. If the inspection is still evaded, impeded, or refused or the supervisor still fails to convene a meeting of shareholders as ordered by the court, the above fine shall be imposed consecutively for each time of non-compliance.
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Section 7.Corporate Bonds
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| Article 246 | A company may, by a resolution adopted by the Board of Directors, invite subscription for corporate bonds, provided that the reasons for the said action as well as other relevant matters shall be reported to the meeting of shareholders.
The aforesaid resolution shall be adopted by a majority of directors at a meeting attended by two-thirds or more of the total number of directors.
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| Article 246-1 | When a company issues corporate bonds, the company may covenant that the preferential order of the corporate bonds to receive indemnification shall be lower than that of other claims of the company.
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| Article 247 | The total amount of corporate bonds of a public company shall not exceed the net remainder of all assets in hands of the company after deducting all liabilities.
The total amount of unsecured corporate bonds shall not exceed one-half of the aforesaid net remainder.
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| Article 248 | When a company plans to issue corporate bonds, an application setting forth therein the following particulars shall be filed with the competent authority in charge of securities affairs:
- The name of the company;
- The total amount of corporate bonds to be issued and the value of each bond;
- The interest rate payable on the corporate bonds;
- The method and deadline date for redemption of the corporate bonds;
- The plan for raising and the method for custody of the funds raised;
- The purpose for which the funds raised by issuing corporate bonds are to be used, and the plan for using such funds;
- If corporate bonds have been issued in the past, the amount of such bonds remains unredeemed;
- The value or the minimum value at which corporate bonds are to be issued;
- The total number of authorized shares of the company and the total number and the amount of shares actually issued;
- The amount of balance of all existing assets of the company after deducting all liabilities and intangible assets;
- The financial statements which should be prepared and submitted pursuant to the requirements of the competent authority in charge of securities affairs;
- The name or title of the trustees of all holders of the corporate bonds, and the covenants made in the mandates except for the issuance of corporate bonds to specific creditors;
- The name or title and the address of the bank or the post office to collect payments on behalf of the company;
- The name or title of the underwriter or the distributing agent(s), if any, and the covenants contained in the mandate;
- The type, name and evidential documents of the security or collateral, if any, provided for issuing the corporate bonds;
- The name or title and the evidential documents of the guarantor(s), if any, for the issuance of the corporate bonds;
- The facts or the current status of previous contract violating act or delay in payment of principal and interest of indebtedness of the company in respect of the corporate bonds previously issued or other liabilities incurred by the company, if any;
- If the corporate bonds to be issued are convertible into shares, the method of such conversion;
- If share subscription warrants is associated with the corporate bonds to be issued, the method for exercising such option;
- The minutes of the meeting of the board of directors involved;
- Other matters pertaining to the issuance of the corporate bonds, or other requirements stipulated by the competent authority in charge of securities affairs.
Issue of corporate bonds, convertible bonds, or corporate bonds with warrants to specific creditors shall be free from the restrictions set out in Item 2, Article 249 and Item 2, Article 250 hereof provided, however, that the company shall, within 15 days after the issuance thereof, submit to the authority in charge of securities affairs for its records a report on the issuance thereof accompanied with relevant supporting information. Companies eligible for issuing corporate bonds to specific creditors shall not be limited to the companies listed on centralized trading floor or over the counter trading places, and the companies whose shares are issued to the public.
The number of creditors to whom the corporate bonds are to be issued shall not exceed 35 persons, but this limitation shall not apply, if the subscribers are of financial institutions.
In the event of any change in any of the particulars declared under the preceding Paragraph, the company shall file to the competent authority in charge of securities affairs an application for correction. The responsible person(s) who fail(s) to apply for such correction shall be subject to a fine of not less than NT$ 10,000 but not more than NT$ 50,000 to be imposed by the competent authority in charge of securities affairs.
The information as required in Item 7; Items 9 through 11; and Item 17 of Paragraph I under this Article shall be audited and certified by a certified public accountant; while the information as required in Items 12 through 16 shall be verified and certified by a practicing lawyer.
The trustees as required in Item 12, Paragraph I under this Article shall be limited to banking and trust enterprises, and shall be appointed at the time when applying for issue of corporate bonds and shall be paid by the company for their services.
In the event the aggregate number and value of the corporate bonds convertible into shares as set forth in Item 18 or of the aggregate number and value of the shares subscribable under Item 19 of Paragraph I of this Article plus the total number of outstanding shares, the total number of shares convertible from the corporate bonds previously issued, the total number of shares subscribable by holders of the share subscription warrants associated to the special shares previously issued, and the total number of shares subscribable by holders of share subscription warrants previously issued exceeds the total number of shares specified in the articles of incorporation, the issue of convertible corporate bonds may be effected only after a change or alteration of the Articles of Incorporation for increasing the amount of capital stock has been made.
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| Article 248-1 | A company issuing convertible bonds or corporate bonds with warrants to specific creditors in accordance with the provision of the preceding paragraph shall be approved by the meeting of the board of directors as provided for in Article 246 and by the resolution of shareholders' meeting. However, a public company shall comply with the provisions otherwise stipulated by the competent authority in charge of securities affairs.
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| Article 249 | Under any of the following circumstances, a company shall not issue unsecured corporate bonds;
- Within 3 years from the date of settlement, where the company has done any act in breach of contract, or has been in default of payment of principal and interest, in respect of previously issued corporate bonds or other debts, although the debt is now settled; or
- Where the company's average annual net profit, after paying tax, of the most recent three years or, in case the company has been in operation for less than three years, of the years the company is in operation, does not reach one hundred fifty per cent of the total amount of interest payable on corporate bonds intended to be issued.
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| Article 250 | Under any of the following circumstances, a company shall not issue corporate bonds:
- Where the company has done any act in breach of contract, or has been in default of payment of principal and interest, in respect of previously issued corporate bonds or other debts, and such state of thing still exist; or
- Where the company's average annual net profit, after paying tax, most recent three years or, in case the company has been in operation for less than three years, of the years the company is in operation, does not reach one hundred per cent of the total amount of interest payable on corporate bonds intended to be issued, provided, however, that corporate bonds that are issued under bank guarantee shall not be restrained.
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| Article 251 | After approval to issue corporate bonds is granted to a company, if any of the particulars in the application shall be found contrary to law or ordinance, or fraudulent, the authority in charge of securities affairs may annul the approval.
In the event of the aforesaid annulment of approval, the invitation to subscriptions in respect to unissued bonds shall be called off, and all issued bonds shall be redeemed immediately. The responsible persons of the company shall be jointly liable to compensate the company and the subscribers for loss or damage resulting there-from.
The provisions of Article 135, Paragraph 2, shall apply, mutatis mutandis, to the circumstances specified in this article, Paragraph 1.
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| Article 252 | After approval of the application for issuing corporate bonds, the board of directors shall, within thirty days after receipt of the notice of such approval, start inviting subscriptions by preparing forms of subscription, setting forth therein all the particulars enumerated in Paragraph I, Article 248, and the title of the authority in charge of securities affairs granting the approval, together with the date and the reference number of the approval letter, and by making a public announcement thereof. But the financial statements as required in Item 11, the covenants set out in the mandate as required in Items 12 and 14, the evidentiary documents as required in Items 15 and 16, and the minutes of the meeting as required in Item 20 under Paragraph I, Article 248 of this Act need not be declared in the public announcement.
Where the company has failed to begin inviting subscriptions during the aforesaid time limit but still desires to invite subscriptions, a new application shall be filed therefore.
If the director designated to represent the company fails to prepare the forms of subscription in accordance with the provisions of Paragraph I, such director shall be subject to a fine of not less than NT$ 10,000 but not more than NT$ 50,000 to be imposed by the authority in charge of securities affairs.
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| Article 253 | Subscribers shall fill in the forms of subscription by indicating therein the amount of subscription and their domiciles or residences, affixing their respective signatures or seals thereon, and assume the obligation to pay the amount they have filled in the forms of subscription.
Subscribers who buy bearer corporate bonds with cash on the spot of subscription need not fill in the aforesaid forms of subscriptions.
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| Article 254 | The Board of Directors shall after subscriptions have been made by subscribers, request such subscribers to pay in full the amounts they have subscribed.
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| Article 255 | Before making the request provided for in the preceding article, the Board of Directors shall prepare a complete list, setting forth therein the name and domiciles or residences of and the amount subscribed by, all subscribers or registered corporate bonds and also the number, serial numbers and amount of money of all bearer corporate bonds already issued, and send the list together with the documents set forth in Article 248, Paragraph 1, to trustees of corporate bondholders.
The aforesaid trustees shall, for the interest of subscribers, have the right to check and supervise the performance by the company of the obligation arising from the issue of corporate bonds.
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| Article 256 | Mortgages or pledges established by the company for the purpose of issuing corporate bonds may be taken over by the trustees for the bondholders and may be established prior to the issue of corporate bonds.
The trustees shall be responsible for the enforcement and safe-keep of the aforesaid mortgages or pledges or the securities furnished under the mortgages or pledges.
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| Article 257 | Certificates of corporate bonds shall, prior to their issuance, bear serial numbers, issuing dates and all the particulars as required Items 1 to 4, and Item 18 and Item 19 under Paragraph I of Article 248 of this Act. If the corporate bonds to be issued are issued under guarantee, or are convertible to shares, or may be used for subscribing shares, they shall be marked with the words of "Guaranteed", "Convertible" and/or "share subscription allowed", and shall be affixed with signature or seal of the director representing a company, and they shall be certified by the bank which is competent to certify bonds under the laws.
In addition to the particulars to be indicated on the certificates of corporate bonds as required by the preceding Paragraph, the name or title and the signature or seal of the guarantor(s) shall also be indicated and affixed on the face of the secured corporate bond certificates.
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| Article 257-1 | (Deleted)
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| Article 257-2 | The company issuing corporate bonds may be exempted from printing the certificate(s) in respect of the corporate bonds issued by it, but shall register the issued bonds with a centralized securities depositary enterprise and follow the regulations of that enterprise.
The transfer and creation of pledge for the corporate bonds registered with a centralized securities depositary enterprise shall be handled by the company or by way of book-entry transfer; Article 164 of this Act and Article 908 of the Civil Code shall not apply.
The preceding paragraph shall not apply to bonds printed but not returned to the company.
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| Article 258 | The counterfoil of corporate bonds shall bear the serial numbers of all such bonds and set forth the following particulars:
- The names or titles and domiciles or residences of corporate bondholders;
- Particulars as required in Items 2 to 4, the names of trustees as required in Item 12, the security/ collaterals and guarantors as required in Items 15 and 16, the particulars concerning conversion as required in Item 18; and the subscription as required in Item19 of Paragraph I, Article 248 of this Act.
- The date of issue of the corporate bonds; and
- The date on which each corporate bond is procured by a corporate bondholder.
Bearer corporate bond certificates shall be marked with the word "bearer" in lieu of the statement required under Item 1 of the preceding paragraph.
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| Article 259 | If the proceeds realized from the issue of corporate bonds are applied for usage other than that stipulated without first applying for approval of such change, the responsible persons of the company shall be subject to imprisonment for a period not exceeding one year, detention and/or a fine not exceeding NT$60,000, and shall be liable to compensate the company for any loss or damage resulting there-from.
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| Article 260 | Registered corporate bond certificates may be transferred with endorsement thereon by the holders; unless the name or title of the transferee is recorded in the bond certificate, and the name or title and domicile or residence of the transferee are recorded in the counterfoil of the corporate bonds, such transfer shall not be set up as a defense against the company.
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| Article 261 | Holders of bearer bonds may at any time request to have them converted into registered bonds.
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| Article 262 | Where it is prescribed that corporate bonds may be converted into shares, the company shall have the obligation to allot shares in accordance with the prescribed method of conversion; however, the corporate bondholders shall have the right to choose.
Where the corporate bond is vested with share subscription right, the issuing company shall have the obligation to allot, in accordance with the subscription regulations, the shares for the holder of corporate bond to exercise the subscription right provided, however that the holder of the share subscription warrant shall have the option whether to exercise such right or not.
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| Article 263 | The company, which issues corporate bonds, or the trustees of corporate bondholders, or the bondholders holding more than five per cent of the total corporate bonds in the same issue, may, for matters concerning the common interest of corporate bondholders convene meetings of corporate bondholders in the same issue.
Resolutions at the aforesaid meeting shall be adopted by two-thirds or more of the votes of bondholders present who hold bonds representing over three-fourths of the total number of corporate bonds and each bondholder shall have one vote for each minimum par value of the bonds.
A holder of bearer corporate bond certificates shall not attend a meeting of corporate bondholders referred to in Paragraph One unless he/she shall have deposited his/her bond certificates with the company five days before the meeting.
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| Article 264 | The resolutions adopted at the meeting of corporate bondholders as provided in the preceding article shall be recorded in the minutes of meeting, signed by the chairman, and reported to the local court for approval and publication, after which such resolutions shall then bind of all corporate bondholders and shall be executed by trustees of corporate bondholders, unless otherwise designated by the meeting of corporate bondholders.
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| Article 265 | The court shall not approve the resolutions of a meeting of corporate bondholders under any of the following certificates:
- The procedure in convening a meeting of corporate bondholders or the method of adopting resolutions at the meeting is in violation of law or ordinance or statement contained in the subscription forms;
- The resolution is not led to adoption in a proper way;
- The resolution is apparently unjust and unfair; or
- The resolution is contrary to the general interest of corporate bondholders.
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Section 8.Issue of New Shares
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| Article 266 | The provisions contained in this section shall govern the issue of new shares by installments under Article 156, Paragraph Four.
The issue of new shares of a company shall be determined by the Board of Directors by a resolution adopted by a majority vote at a meeting attended by over two-thirds of the directors.
The provisions of Article 141 and Article 142 shall apply mutatis mutandis to the issue of new shares.
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| Article 267 | Unless otherwise approved specifically by the central authority in charge of the object enterprise, when a company issues new shares, there shall be ten to fifteen per cent of such new shares reserved for subscription by employees of the company.
When a government operated enterprise issues new shares, it may, after obtaining the special approval from the competent authority in charge of the said enterprise, reserve no more than ten per cent of such new shares for subscription by its employees.
In issuing new shares, a company shall make public announcement and advise, by notice, its original shareholders to subscribe for, with preemptive right, the new shares, except those reserved under either of the preceding two paragraphs, in proportion respectively to their original shareholding and shall state in the notice that if any shareholder fails to subscribe for new shares, his right shall be forfeited. Where a fractional percentage of the original shares being held by a shareholder is insufficient to subscribe for one new share, the fractional percentages of the original shares being held by several shareholders may be combined for joint subscription of one or more integral new shares or for subscription of new shares in the name of a single shareholder. New shares left unsubscribed by original shareholders may be open for public issuance or for subscription by specific person or persons through negotiation.
The right to subscription of new shares as provided for in the preceding three paragraphs, except those reserved for subscription by employees, may be separated from the rights in original shares and transferable independently.
The provisions provided in Paragraphs One and Two under this Article for reserving the right of subscribing new shares by employees shall not apply to the case where the new shares are distributed to original shareholders as dividend shares capitalized with the reserve fund or the value increments of assets.
A company may restrain the shares subscribed by its employees under Paragraph One or Paragraph Two of the article from being transferred or assigned to others within a specific period of time which shall in no case be longer than two years.
Qualification requirements of employees, including the employees of parent s or subsidiaries of the company meeting certain specific requirements, entitled to receive shares in accordance with the provision of Paragraph One, may be specified in the Articles of Incorporation.
The provisions set out in this Article shall not apply to the company which is merged by or with another company, or is split up, or is under reorganization, or is issuing new shares in accordance with the provisions set out in Article 167-2, Article 235-1, Article 262, or Paragraph I, Article 268-1 of this Act.
A company issuing restricted stock for employees shall not apply Paragraphs One to Six of this Article and shall adopt such resolution, at a shareholders’ meeting, by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares.
In the event the total number of shares represented by the shareholders present at a shareholders’ meeting of a public company is less than the percentage of the total shareholdings required in the preceding Paragraph, the resolution may be adopted by two-third of the voting rights exercised by the shareholders present at the shareholders’ meeting who represent a majority of the outstanding shares of the company.
Qualification requirements of employees, including the employees of parents or subsidiaries of the company meeting certain specific requirements, entitled to receive restricted stock for employees in accordance with the provision of Paragraph Nine, may be specified in the Articles of Incorporation.
The competent authority in charge of securities shall prescribe rules governing the issuance amount, issuance price, issuance conditions and other matters for compliance for a company offering its shares to the public and issuing new shares in accordance with the preceding three Paragraphs.
The responsible person of a company violating the provisions of Paragraph I under this Article shall be subject to a fine of not less than NT$ 20,000 but not more than NT$ 100,000.
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| Article 268 | For issue of new shares, a company shall, unless such new shares are fully subscribed by its original shareholders and employees or by specific persons by agreement without any new share being open for public issuance, file an application, setting forth therein the following particulars, with the competent authority in charge of securities affairs for approval of public issuance:
- The name of the company;
- The originally authorized total number of shares, number of shares issued, and the value thereof;
- The total number of new shares to be issued, par value of each share and other terms of issue;
- The financial statements as required by the competent authority in charge of securities affairs;
- The capital increase plan;
- Where special (preference) shares are to be issued, the kinds and number of such shares, and the par value of each share, together with the matters specified in Items One to Three, Six and Eight of Paragraph One, Article 157;
- The number and amount of shares can be subscribed by each holder of a share subscription warrant or the person entitled to subscribe preferred shares;
- The name and address of bank or post office to collect payment on shares on behalf of the company;
- The name of the underwriter or distribution agency, if any, and matters agreed upon between the company and the underwriter or distributing agency;
- The minutes indicating the resolution for the issue of new shares; and
- Other matters as may be required by the competent authority in charge of securities affairs.
In the event of any change in any of the particulars required under the preceding paragraph, the company shall apply to the competent authority in charge of securities affairs for correction. The responsible person of the company who fails to apply for such correction shall be imposed a fine by the competent authority in charge of securities affairs of not less than NT$ 10,000 but not more than NT$ 50,000.
All matters specified in Items 2 to 4 and 6 of Paragraph I shall be examined and certified by a certified public accountant, and those in Items 8 and 9, Paragraph I under this Article shall be examined and certified by a practicing lawyer.
The provisions of Paragraphs I and II under this Article shall not apply to the issue of new shares as referred to in Paragraph V of Article 267 of this Act.
In case the aggregate of the number of new shares to be issued by a company and the number and amount of share subscription warrants or the shares subscribable under the ancillary special share subscription rights plus the total number of outstanding shares, the total number of shares which can be acquired under outstanding convertible corporate bonds, the total number of shares subscribable under outstanding corporate bonds vested with share subscription rights, the total number of special shares subscribable under outstanding ancillary special share subscription warrants, and the total number of shares subscribable under outstanding share subscription warrants exceeds the total number of shares authorized by the Articles of Incorporation, such excessive number of shares may be issued only after completing the procedure for capital increase by making necessary changes or alterations in the Articles of Incorporation.
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| Article 268-1 | The company issuing share subscription warrants or special shares under ancillary share subscription rights shall have the obligation to allot the shares in accordance with the share subscription regulations, without being bond by the provisions set out in Article 269 and Article 270 of this Act provided, however, that the holders of such share subscription rights shall have the option whether to exercise such subscription rights or not.
The provisions set out in Paragraph II, Article 266; Paragraphs I and II, Article 271; Article 272; and Paragraphs II and III, Article 273 hereof shall apply, mutatis mutandis, to company issuing share subscription warrants.
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| Article 269 | Under any of the following circumstances a company shall not publicly issue special shares with preference;
- Where its average net profit of the most recent three years or, in case the company has commenced its business for less than three years, of the years the company is in operation, after paying taxes, is not sufficient to pay dividends on special shares already issued and intended to be issued;
- Where it has been in default in making regular payment of dividends on special shares already issued.
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| Article 270 | Under any of the following circumstances a company shall not publicly issue new shares:
- Where it has incurred losses in the most recent two consecutive years; this, however, shall not apply where the nature of business requires a longer period for preparation or it has a sound business plan under which its profit-making capability will be improved; or
- Where its assets are not sufficient to meet liabilities.
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| Article 271 | After approval to issue new shares publicly is granted to a company, if any of the particulars in the application shall be found contrary to law or ordinance or to be fraudulent, the authority in charge of securities affairs may annul the approval.
In case of the annulment in accordance with the preceding paragraph, all unissued shares shall be withheld from issuing and holders of issued shares may, from the time of annulment, demand repayment at the original fixed value of the shares together with legal interest and may claim compensation for loss or damage resulting there-from.
The provisions of Article 135, Paragraph 2 shall apply, mutatis mutandis, to this article.
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| Article 272 | When a company publicly issues new shares, the payment on such shares shall be in cash; where such shares are not issued to the public; however, but rather subscribed to by shareholders or by particular persons by agreement, any property necessary to the business of the company may be in lieu thereof
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| Article 273 | When a company publicly issues new shares, the board of directors shall prepare forms of subscription, setting forth therein the following particulars, to be filled by each subscriber with the number of shares subscribed, the kind and value thereof, and his domicile or residence, and to be signed and sealed by the subscriber:
- Particulars specified in Article 129 and Paragraph One of Article 130;
- The total number of shares originally authorized or the number of shares already issued out of the total number of authorized shares after increase of capital and the value thereof;
- Particulars specified in Article 268, Paragraph 1, Items 3 to 11; and
- The time of payment for shares subscribed.
When a company publicly issues new shares, the company shall insert in the aforesaid forms of subscription the serial number of the document of approval and the date of approval by the competent authority in charge of securities affairs and shall, within thirty days after receipt of the notice of approval from such authority, publicly announce the particulars specified in the preceding paragraph together with the serial number of the document of approval and the date of approval and issuance of such shares. The business report, inventory, meeting minutes and the matters agreed upon with underwriter or distributing agency need not be publicly announced.
After the expiration of the time-limit set forth in the preceding paragraph, if a company still desires to invite public subscriptions, a new application shall be filed.
If the director designated to represent the company fails to prepare the forms of subscription in accordance with the provisions of Paragraph I under this Article, such director shall be subject to a fine of not less than NT$ 10,000 but not more than NT$ 50,000 to be imposed by the competent authority in charge of securities affairs.
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| Article 274 | Where a company issues new shares other than to the public, under the proviso to Article 272, it shall still be required to make the forms of subscription available as required by Paragraph I of the preceding Article. If property other than cash is paid by subscribers, additional particulars such as the name/title of the subscriber, the type, the quantity and the value of or the standards for evaluation of the value of the property furnished by the subscriber, and the number of shares allotted to the subscriber by the company shall also be stated in the form of subscription.
After accepting property other than cash payment, the Board of Directors shall pass it on to the supervisor for inspection and comment, and shall report to the authority for approval.
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| Article 275 | (Deleted)
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| Article 276 | Upon expiration of the time limit set forth for payment on new shares, if there are still some not subscribed or some subscribed but withdrawn or not yet paid for, the shareholders who subscribed the new shares and paid for them may set a time limit of over one month to press the company for full subscription and full payment on shares, failing which the shareholders may withdraw their subscriptions and the company shall refund the money paid on shares together with legal interest.
Directors whose acts are responsible for loss or damage to the company under the aforesaid circumstance shall be jointly liable for compensation.
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Section 9.Modification or Alteration of the Articles of Incorporation
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| Article 277 | A company shall not modify or alter its Articles of Incorporation without a resolution adopted at a meeting of shareholders.
The aforesaid resolution at the meeting of shareholders shall be adopted by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares.
For a company that has had its share certificates publicly issued, if the total number of shares represented by shareholders present at a shareholders' meeting is not sufficient to meet the criteria specified in the preceding paragraph, the resolution may be adopted by two-thirds of the votes of the shareholders present at a shareholders' meeting who represent a majority of the total number of issued shares.
Where stricter criteria for the total number of shares represented by shareholders present at a shareholders' meeting and the number of votes required to pass a resolution as referred to in the preceding two paragraphs are specified in the Articles of Incorporation, such stricter criteria shall govern.
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| Article 278 | (Deleted)
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| Article 279 | In case of replacement of old share certificates by new ones as a result of a reduction in capital, the company shall, after the registration of such reduction in capital, serve a notice upon each shareholder and require all shareholders to exchange their share certificates for new ones within a period of not less than six months, and shall make it known to all shareholders that any person who fails to effect such exchange within the time limit may forfeit all rights he shall otherwise enjoy as a shareholder.
Any shareholder who fails to make the exchange within the aforesaid time-limit shall forfeit all rights and privileges he shall otherwise enjoy as a shareholder, and the company may dispose of his shares by auction and pay the proceeds realized there-from to such shareholder.
Responsible persons of the company who violate the provision of Paragraph One pertaining to the time limit for notice shall be severally subject to a fine of not less than NT$3,000 but not more than NT$15,000.
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| Article 280 | In the event of a consolidation of shares as a result of reduction in capital, the provisions of Paragraph 2 of the preceding article shall apply mutatis mutandis to the disposition of shares which cannot be consolidated.
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| Article 281 | The provisions of Article 73 and Article 74 shall apply mutatis mutandis to reduction of capital.
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Section 10.Reorganization of a Company
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| Article 282 | Where a company which publicly issues shares or corporate bonds suspends its business due to financial difficulty or there is an apprehension of suspension of business thereof, but there is a possibility for the company to be constructed or rehabilitated, the company or any of the following interested parties may apply to the court for reorganization:
- Shareholders who have been continuously holding shares representing ten per cent or more of the total number of issued shares for a period of six months or longer;
- Creditors of the company who have claims equivalent to ten per cent or more of the capital from the total number of issued shares;
- Labor unions; or
- Two-third or more of the Employees of a company.
For filing the reorganization application by a company under the preceding Paragraph, the Board of Directors of the company shall adopt a resolution by a majority vote of the directors present at a meeting of the Board of Directors attended by over two-thirds of all directors.
The labor unions referred to in Item Three, Paragraph One denote the following labor unions:
- Corporate union;
- The industrial union whose members are joined by more than one half of employees employed by the company.
- The professional union whose members are joined by more than one half of employees with the same professional skills employed by the company.
The employees referred to in Item Four, Paragraph One shall be calculated based on the employee number of the roster of labor insurance of the company at the date of applying for reorganization.
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| Article 283 | The application for reorganization of a company shall be filed to the court in writing in five copies by the applicant(s) and shall state therein the following particulars:
- The name and domicile or residence of the applicant and a statement on the status of the petitioner as such; in case the applicant is a juristic person, or an organization or agency, the title, the business place of office of the applicant;
- The name or title and the location of the statutory representative or the agent, if any, and the relationship between the statutory representative and the applicant;
- The name, location, office, business place, and the name, domicile or residence of the responsible person representing the company;
- The cause and the fact of the application;
- The business undertaken by the company and the condition of such business;
- The reports, financial statements, records and books prepared by the company for the most recent year in accordance with the provisions set out in Article 282 hereof. If the application date falls beyond the sixth month after commencement of a year, a separate semi-annual balance sheet for the first half of the current year shall also be submitted; and
- Opinions on the reorganization of the company.
The matters as required in Items 5 through7 of the preceding Paragraph may be supplemented by attachments.
In case the application is filed by the company, a substantial reorganization proposal shall be submitted. In case the application is filed by shareholders, creditors, labor unions or employees employed by the company, the documents identifying the qualification of the applicants shall be filed along with the application, but particulars as required in Items 5 and 6 of Paragraph I under this Article need not be stated.
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| Article 283-1 | Under any of the following circumstances, an application for reorganization shall be dismissed by the court:
- Where the application is not filed in accordance with the proper procedure provided, however, that if the improper filing procedure can be rectified, the applicant shall be ordered to take corrective action;
- Where the company has not made public issuance of shares or corporate bonds;
- Where the company has been adjudicated bankrupt by a final ruling;
- Where the settlement resolution made by the company in accordance with the Bankruptcy Law has become final;
- Where the company has been dissolved; or
- Where the company has been ordered to wind up and to liquidate within a given time limit.
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| Article 284 | Subject to the dismissal of the application as provided for in the preceding Article, the court shall, when it receives an application for reorganization, forthwith send copies of such application to the competent authority, the central authority in charge of end-enterprise concerned, and the authority in charge of securities affairs, and shall solicit their substantial opinions as to whether the reorganization shall be effected or not.
The court may also solicit the opinions on the proposed reorganization from the taxation authority and other relevant authorities at the locality of the company.
The authorities whose opinions are solicited by the court in accordance with the provisions of the preceding two Paragraph shall give their opinions within 30 days.
In case the applicants are shareholders or creditors of a company, the court shall send a notice with a copy of the application to the company.
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| Article 285 | In addition to the requests for opinions as provided in the preceding article, the court may also select and appoint a person with specialized knowledge or experience in the operation of the business of the company but without any interest therein as the inspector who shall, within thirty days after appointment, complete the following examinations and submit a report accordingly:
- The actual business, financial condition, and evaluation of the assets of the company;
- To examine in the light of the analysis of the business and financial conditions, the assets and production equipment of the company to see whether the reconstruction or rehabilitation of the company is possible or not;
- To examine the merits and demerits of the previous business operation of the company and the records of management of the operation by the responsible person of the company to see whether there was any neglect or improper practices;
- To examine whether there is any fraudulent or false statement in the application;
- To examine the feasibility of the reorganization proposal, if the applicant is the company; and
- To examine other relevant reorganization proposals.
The inspector may inspect all books, records of accounts, documents and property relating to the business or finance of the company. The directors, supervisors, managerial personnel, or other staff personnel shall have the obligation to answer the enquiries made by the inspector regarding the operation and financial activities.
Directors, supervisors, managerial officers and other employees of the company who refuse the aforesaid examination or refuse to answer the aforesaid questions without reason or make false statements shall be severally subject to a fine not less than NT$ 20,000 but not more than NT$ 100,000.
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| Article 285-1 | Based on the report made by the inspector and by making reference to the opinions provided by the central authority in charge of the end enterprise concerned, the authority in charge of securities affairs, the central authority in charge of financial affairs, and other relevant authorities and organizations, the court shall, within 120 days after its receipt of a reorganization application filed by a company, render a ruling to approve or to dismiss the said re-organization application and shall notify all authorities concerned of such ruling accordingly.
The 120-day reviewing period fixed in the preceding Paragraph may be extended by a ruling to be made by the court for an additional 30 days provided that no more than two extensions may be made.
Under either of the following circumstances, the court may dismiss a company re-organization application:
- Where any statement or information contained in the written application documents is found false or untrue; or
- Where reconstruction and/or rehabilitation as proposed by the applicant is deemed unfeasible after considering the business and financial conditions of the company.
When dismissing a company reorganization application by a ruling to be rendered in accordance with the provisions set out in the preceding Paragraph, the court may, ex officio, make a bankruptcy pronouncement, if the conditions for bankruptcy are met.
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| Article 286 | Prior to a ruling for reorganizers of a company, the court may order responsible persons of the company to prepare and submit lists of creditors and shareholders of the company within seven days according to the nature of their rights respectively, stating therein also their domiciles or residences and the total amount of credits or the total amount of money in shares.
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| Article 287 | Prior to rendition of a ruling for reorganization of a company, the court may, at the request of the company or an interested party or ex officio, render a ruling for the following disposal:
- Disposal for preservation of the company's property;
- Restriction on the business of the company;
- Restriction on performance of obligation of the company and exercise of claim against the company;
- Suspension of proceedings for bankruptcy, com- position, or compulsory execution and others;
- Prohibition of transfer of registered share certificates; and
- Assessment of the liabilities of responsible persons of the company to compensate the company for loss or damage and preservation of their property.
The term of validity of the ruling to be made under the preceding Paragraph shall not exceed 90 days, unless otherwise fixed by the court; and may be extended when necessary by the court at the request of the company or an interest party provided that the duration of each extension shall not exceed 90 days.
In case the ruling for dismissing a company reorganization application becomes final prior to the expiry of the term of validity referred to in the preceding Paragraph, then the ruling rendered under Paragraph I under this Article shall become null and void.
In rendering a ruling under the provisions of Paragraph I of this Article, the court shall inform, by a notice, the authority in charge of securities affairs and the central authority in charge of the relevant end enterprise.
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| Article 288 | (Deleted)
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| Article 289 | At the time of ruling for reorganizers, the court shall select and appoint a person with specialized knowledge and experience in the operation of the business of such company or a banking institution as reorganization supervisor and decide on the following matters:
- The period and place for declaring rights of creditors and shareholders, and the period shall not be less than ten days nor more than thirty days from the date of ruling;
- The date and place to examine rights of creditors and shareholders thus declared, and the date shall be within ten days of the date of expiration of the aforesaid period for declaration; and
- The date and place of the first meeting of parties concerned, and the date shall be within 30 days of the date after expiration of the period for declaration mentioned in Item 1.
The aforesaid reorganization supervisor shall act under the supervision of the court and may be discharged by the court at any time.
In case there is a plural number of reorganization supervisors, supervision on the execution of all matters relating to reorganization shall be effected by a majority vote of them.
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| Article 290 | The reorganizers of the company shall be selected and appointed by the court from among the relevant experts recommended by creditors, shareholders, directors, the central authority in charge of the relevant end enterprise, and/or the authority in charge of securities affairs.
The provisions set out in Article 30 hereof shall apply mutatis mutandis to reorganizers.
In the meeting of interested parties, if the result of the voting conducted in groups under Article 302 shows that two or more groups prefer a change of reorganizers, a list of candidates may be submitted to the court along with an application for such change.
In case there is a plural number of reorganizers, execution of all matters relating to reorganization shall be effected by a majority vote of them.
In the execution of duties, the reorganizers shall act under the supervision of the reorganization supervisors. In case a reorganizer Acts in violation of the laws or improperly, the reorganization supervisors may apply to the count for discharging his/her office and selecting a new one
In the execution of duties, the reorganizers shall secure the prior consent of the reorganization supervisor:
- Disposal of property of the company outside the scope of its business;
- Change of the business of the company or in the ways of operation;
- Contract of loans;
- Conclusion or rescission of important or long term contracts, the scope of which shall be determined by the reorganization supervisor;
- Proceeding in litigation or arbitration;
- Waiver or assignment of rights of the company;
- Dealing in cases where others exercise rights of retrieval, rescission or set-off;
- Appointment and removal of important officers of the company; and
- Other acts restricted by the court.
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| Article 291 | After rendering a ruling of company reorganization, the court shall publish the following particulars by means of a public notice:
- The text and the date of the ruling of company reorganization;
- The name or title and the domicile or address of the reorganization supervisor and the reorganizers;
- The period, date and place as fixed in accordance with the provisions of Paragraph I, Article 289 hereof; and
- The legal consequences which may result from the negligence of the creditors of the company to declare their claims and rights.
The court shall still be obligated to serve notice in writing of the ruling and the particulars contained therein to the reorganization supervisor, the reorganizers, the company and the known creditors and the shareholders.
At the time the court sends the aforesaid notice of ruling to the company, the court shall send a court clerk to write down in the accounting books the account-closing decision, to affix thereon his signature or seal, and to write down a brief statement describing the condition of such accounting books.
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| Article 292 | The court shall, after rendering ruling for reorganization, notify the competent authority with a copy of such ruling for registration of the institution of reorganization; the company shall post the copy of the aforesaid ruling on the notice board of the its registered office.
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| Article 293 | After delivery of the ruling for reorganization of the company, the operation of the business of the company and the power of controlling and disposing of the property thereof shall be transferred to reorganizers, and the reorganization supervisor shall supervise such transfer, which shall then be reported to the court. Upon such transfer, the shareholders' meeting, directors and supervisors shall cease to perform their duties and to exercise their powers.
At the time of the aforesaid transfer, the directors and managerial officers of the company shall hand over to the reorganizers all statements and records of accounts and documents relating to the business and finance of the company and all property thereof.
The directors, supervisors, managerial personnel, or other staff personnel shall have the obligation to answer the enquiries made by the reorganization supervisors or reorganizers regarding the operation and financial activities.
Directors, supervisors, managerial officers or other members of the staff of the company, for any of the following acts, shall be severally subject to imprisonment for a period not exceeding one year, detention and/or a fine not exceeding NT$60,000:
- Refusal to transfer;
- Concealment, destruction or damage of statements, records of accounts or documents relating to the business or financial condition of the company;
- Concealment, destruction, or removal of property of the company, or the disposal of such property a manner prejudicial to creditors;
- Refusal to answer questions mentioned in the aforesaid paragraph without reason; and
- Fabrication of debts or acknowledgement of untrue debts.
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| Article 294 | After a ruling for reorganization is rendered, all procedures of bankruptcy, composition, compulsory execution and other litigation involving property shall be suspended in due course.
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| Article 295 | The disposition made by the court in accordance with the provisions of Article 287, Paragraph 1, Items 1, 2, 5 and 6 shall remain in effect regardless of the ruling for reorganization, and in the absence of such disposition, the court may still render such rulings on the application of an interested party or the reorganization supervisor or ex officio after having rendered the ruling for reorganization.
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| Article 296 | All rights of creditors of the company established prior to the ruling for reorganization shall be rights of creditors in reorganization; all rights with preference for repayment according to law shall be preferred rights of creditors in reorganization; all rights secured by mortgages, pledges or rights of retention shall be secured rights of creditors in reorganization; and all rights without such security shall be rights of creditors without security. All such rights of creditors shall not be exercised unless in a accordance with reorganization procedures.
The provisions of the Bankruptcy Law relating to the rights of creditors in bankruptcy, with the exception of provisions governing right of discriminative, and preferential rights shall apply mutatis mutandis to the aforesaid rights of creditors.
Rights of retrieval, rescission or set off shall be exercised against the reorganizers.
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| Article 297 | All creditors in reorganization shall produce documents to sufficiently prove the existence of their rights for declaring their rights to the reorganization supervisor and, if so declared, the prescription is interrupted and, if not declared, no repayment shall be made according to the reorganization procedures.
In case of failure to declare as provided for in the preceding paragraph for causes not attributable to the persons of whom declaration is required, such persons may make good the declaration within fifteen days after extinction of the cause; however, no declaration shall be accepted after the reorganization plan has been adopted at a meeting of the concerned parties.
Rights of shareholders of the company shall be based on records in the shareholders’ roster.
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| Article 298 | The reorganization supervisor shall, after the expiration of the period for declaring rights, in accordance with findings in the preliminary examination, prepare lists of preferred creditors in reorganization secured creditors in reorganization, unsecured creditors in reorganization and shareholders respectively, stating therein the nature of their rights, sums of money and number of votes, and shall submit a report to the court, keep all of the above at a suitable place, and publicly announce the date and place of such keeping so that the creditors in reorganization, shareholders and other interested persons may inspect, all to be done three days before the date mentioned in Article 289, Paragraph 1, Item 2.
The number of votes of creditors in reorganization shall be determined in proportion to the amounts of money involved in their credits. The number of votes of shareholders shall be provided in the Articles of Incorporation.
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| Article 299 | In the court's session of hearing rights of creditors in reorganization and rights of shareholders, the reorganization supervisor, reorganizers, and responsible persons of the company shall be present to answer inquiries, and the creditors in reorganization, shareholders and other interested persons may be present to express their opinions.
In the event of any objection to the right of creditor or the right of shareholder, the court shall render a ruling on such right.
Any interested person who substantially contests the right of creditor or the right of shareholder shall institute an action for determination within twenty days after the service of the ruling referred to in the preceding paragraph, and prove to the ruling court that such action has been instituted. After instituting such action and before a judgment thereto becomes irrevocable, the right concerned shall be exercised according to the contents of, and in the amount allowed by the ruling referred to in the preceding paragraph; however, in receiving the repayment in accordance with the plan of reorganization, the amount received shall be deposited with a court.
A right of creditor or a right of shareholder shall be deemed final and shall have the same effect as an irrevocable judgment against the company and all the shareholders and creditors of the company if prior to the end of hearing in court no objection was raised against such right.
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| Article 300 | All creditors in reorganization and shareholders shall be concerned persons in the reorganization of the company and shall attend meetings of concerned persons. They may appoint a proxy to attend such meetings if they are unable to do so in person for any cause.
The reorganization supervisor shall be the chairman of all meetings of concerned persons and shall convene all such meetings with the exception of the first meeting.
The reorganization supervisor, in calling meetings as provided in the preceding paragraph, shall serve notice and public announcement five days prior to the meeting, stating therein the purpose of the meeting. In the event that no conclusion can be reached at one meeting, and announcement to adjourn or postpone the meeting is made on the spot by the reorganization supervisor, then no service of notice or public announcement is required.
At the meeting of concerned persons, the reorganizers and responsible persons of the company shall be present to answer inquiries.
Responsible persons of the company who refuse to answer inquiries as aforesaid without reason or make false statement in their replies shall be severally subject to imprisonment for a period not exceeding one year, detention and/or a fine not exceeding NT$60,000.
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| Article 301 | The functions of the meeting of concerned persons are as follows:
- To hear reports on business and financial conditions of the company and opinions on reorganizers of the company;
- To deliberate and vote on the reorganization plan; and
- To resolve other matters relating to reorganization.
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| Article 302 | At the meeting of concerned persons, the voting right shall be exercised in groups of claimants as provided in Article 298, Paragraph 1, and resolutions shall be adopted by a majority vote of over one-half of the aggregate votes of different groups.
In the event that there is no net value of capital of the company, the shareholders group shall not exercise voting right.
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| Article 303 | The reorganizers shall draw up a plan of reorganization and submit same together with reports and statements of business and finance of he company to the first meeting of concerned persons for examination.
In the event of a change of reorganizers as provided in Article 290, the reorganization plan shall be submitted by newly appointed reorganizers within one month.
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| Article 304 | The following particulars, if any, in the reorganization of a company, shall be stated clearly in the reorganization plan:
- Changes in rights of any or all creditors in reorganization or shareholders;
- Changes in part or all of the business;
- Disposal of property;
- Ways and means of paying debts and the financial source thereof;
- Standards and methods of valuation of assets of the company;
- Alteration of the Articles of Incorporation of the company;
- Readjustment or reduction of employees;
- Issue of new shares or corporate bonds; and
- Other necessary matters.
Subject to the deadline date for discharge of all liabilities otherwise fixed, the duration for execution of the company reorganization plan shall not exceed one year as calculated from the date on which the court ruling of approval of the reorganization plan becomes final. In case the reorganization plan can not be completed as scheduled with good cause shown, an application for extension may be filed, with prior consent of the reorganization supervisors, with the court for a court ruling of extension provided, however, that if the reorganization plan is still not completed upon expiry of the extended period, then the court may, ex officio or at the petition of interested party or parties, render a ruling of termination of the company reorganization plan.
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| Article 305 | In case the reorganization plan is adopted at the meeting of interested parties, the reorganizers shall apply to the court for a ruling of approval and thereupon execute it, and shall also report such court ruling of approval to the competent authority for its record.
The company reorganization plan approved by the court shall bind on the company and the interested parties, and if the obligation to perform as specified in such plan can be set up as the object of compulsory execution, the reorganization plan may be subject to compulsory execution accordingly.
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| Article 306 | In case the plan of reorganization is not adopted by the groups with voting right at the meeting of persons concerned, the reorganization supervisor shall forthwith report to the court and the court may direct modification or alteration on fair and reasonable principle and order the meeting of persons concerned to reconsider the plan within one month.
In case the aforesaid plan of reorganization remains not adopted upon reconsideration at the meeting of persons concerned, the court shall render a ruling to terminate the reorganization; however, if the company is really worthy of reorganization the court may, as against the dissenting group, amend the plan of reorganization in any one of the following ways and render a ruling to approve it:
- That the property held as security by secured creditors in reorganization together with the right of claim is to be transferred to the company after reorganization, and such right is to remain in existence without any change;
- That the property held as security by secured creditors in reorganization, the property that can be appropriated to meet repayments to unsecured creditors in reorganization and the residual property that can be distributed to shareholders may, on the basis of its price if fair deals and in proportion to the sharing parts to which such creditors and shareholders are entitled, be disposed of for repayment, distributed to those entitled to receive it, or deposited with a court; or
- Other fair and reasonable ways beneficial to maintaining the business of the company and protecting the right creditors.
In case the plan of reorganization mentioned in the first paragraph of the preceding article or in the preceding paragraph cannot or need not be executed on account of change in circumstances or for a good cause, the court may, on application of the reorganization supervisor, reorganizers, or persons concerned, render a ruling to order the meeting of persons concerned to reconsider. In case there is obviously no possibility of or necessity for reorganization, the court may render a ruling for termination of reorganization.
The aforesaid plan of reorganization adopted on reconsideration shall be submitted in an application to the court for a ruling of approval.
In case the reorganization plan is not resolved by the meeting of the interested parties within one year after the ruling served to the company, the court may, ex officio or at the petition of interested party of parties, render a ruling of termination of the reorganization; the same procedure shall be followed if the reorganization plan is not resolved within one year after the ruling of reconsideration served to the company by the court according to the third paragraph.
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| Article 307 | In taking the measures as set forth in the two preceding Articles, the court shall seek the opinions of the central competent authority, the central authority in charge of the relevant end enterprise, and also the authority in charge of securities affairs.
Where the court renders a ruling for termination of reorganization, it shall notify the competent authority and provide it with a copy of such ruling; and the competent authority shall, when the said court ruling becomes final, forthwith make a registration of termination of the reorganization plan, and if the conditions for bankruptcy are met, the court may, ex officio, render a ruling to pronounce the company bankrupt.
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| Article 308 | Except when the provisions of the Bankruptcy Law shall govern in the case that a court has ex officio, rendered a judgment to adjudge a company bankrupt, a ruling for termination of reorganizers rendered by a court shall have the following effects:
- Any disposition or effect thereof under Article 287, Article 294, Article 295 or Article 296 shall be null and void;
- A person who has been barred from exercising his right for neglect in declaring the right shall have such right restored; and
- The shareholders' meeting, directors and supervisors whose powers and functions have been suspended on account of reorganization shall have such powers and functions restored forthwith.
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| Article 309 | During the process of reorganization of a company, if any of the following provisions conflict with the fact, the court may, at the request of the reorganizers, render a ruling of other appropriate disposition:
- The provisions of Article 277 governing amendment or alteration of the Articles of Incorporation;
- The provisions of Article 279 and 281 governing the period of time for serving notice and making public announcement of and restrictions on the reduction of capital;
- The provisions of Article 268 to 270 and Article1 276 governing issue of new shares;
- The provisions of Article 248 to 250 governing issue of corporate bonds;
- The provisions of Article 128, Article 133, Article 148 through 150, and Article 155 governing incorporation of companies; or
- The provisions of Article 272 governing the categories of capital contribution.
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| Article 310 | Reorganizers of a company shall complete the reorganization plan within the implementation schedule specified therein; and upon completion of the reorganization plan, shall apply to the court for a court ruling of recognition of the completion of the reorganization, and shall, after such court ruling became final, convene a meeting of shareholders for election of directors and supervisors.
After assuming their offices as directors and supervisors, the directors and supervisors shall, in conjunction with the reorganizers, file an application with the competent authority for registration or for company alteration registration.
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| Article 311 | Upon completion, the reorganization of a company shall have the following effects:
- The rights of claims on the unpaid parts of obligatory rights already declared shall expire except such parts as assigned to and assumed by the company after reorganization according to the plan of reorganization; the same shall apply to obligatory right not declared;
- The changed, decreased or cancelled part of the right of shareholders in consequence of the reorganization shall expire; and
- Procedure of bankruptcy, composition, compulsory execution and other litigations involving property of the company prior to the ruling for reorganizers shall be ineffective.
The rights of creditors of a company against securities and other common debtors of the obligations of the company shall not be affected by the reorganization of the company.
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| Article 312 | The following debts incurred during the reorganization of the company shall have preference for repayment over the rights of creditors in reorganization:
- Debts incurred for continued operation of the business of the company; and
- Expenses incurred in the process of reorganization.
The aforesaid right of preference for repayment shall not be prejudiced on account of a ruling for termination of reorganization.
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| Article 313 | Inspectors, reorganization supervisors and reorganizers shall perform their duties with the care of good administrators. Their remuneration shall be determined by the court in consideration of the nature of their duties.
An inspector, reorganization supervisor or reorganizer who violates law or ordinance in the performance of his duties, thereby causing loss or damage to the company, shall compensate the company.
Inspectors, reorganization supervisors or reorganizers who make a false statement or record of their acts within the scope of duties shall be severally subject to imprisonment for a period not exceeding one year, detention and/or a fine not exceeding NT$60,000.
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| Article 314 | The provisions of the Code of Civil Procedure shall apply mutatis mutandis to jurisdiction, application, notification process service, public announcement, ruling interlocutory appeal, and other proceedings in this section.
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Section 11.Dissolution, Consolidation or Merger and Split-up
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| Article 315 | A company limited by shares shall be dissolved under any of the following circumstances:
- Upon occurrence of the cause of dissolution as specified in the Articles of Incorporation;
- Upon achievement or non-achievement of the objective of the business undertaken by the company;
- Upon adoption of a resolution to dissolve the company at a meeting of shareholders;
- Where the number of shareholders of registered share certificates is less than two persons; except that the only one shareholder is a government agency or a juristic person;
- Upon consolidation or merger with another company;
- Upon split-up of the company;
- Upon bankruptcy of the company; and
- Upon rendition of a dissolution order or judgment.
Under the circumstance specified in Item 1 of the preceding paragraph, the company may continue its business operations after amendment or alteration of the Articles of Incorporation is approved by a meeting of shareholders; and under the circumstance set forth in Item 4, the company may continue its business operations by increasing the number of shareholders of registered share certificates.
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| Article 316 | A resolution for dissolution, consolidation or merger, or split-up of a company shall be adopted by a majority vote at a meeting of shareholders attended by shareholders representing two-thirds or more of the total number of the outstanding shares of the company.
For a company that has its share certificates publicly issued, if the total number of shares represented by shareholders present at a shareholders’ meeting is not sufficient to meet the criteria specified in the preceding paragraph, the resolution may be adopted by two-thirds of the votes of the shareholders present at a shareholders’ meeting attended by shareholders representing a majority of the total number of the outstanding shares of the company.
Where a higher criteria for the total number of shares represented by the shareholders present at a meeting of shareholders and the total number of votes required to adopt a resolution thereat are specified in the Articles of Incorporation of the company, such higher criteria shall prevail.
When a company is to be dissolved for any cause other than bankruptcy, the board of directors shall forthwith notify each of the shareholders of the essentials of such dissolution plan.
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| Article 316-1 | In the case of merger/consolidation between two independent companies limited by shares or between a company limited by shares and a limited company, the surviving company or the newly incorporated company under the merger/consolidation project shall be limited to a company organized in the form of a company limited by shares.
In the case of split-up of a company limited by shares, the surviving company or the newly incorporated company shall be limited to a company organized in the form of a company limited by shares.
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| Article 316-2 | Where 90% or more of the outstanding shares of a subsidiary company is held by its controlling company, the controlling company may merge/consolidate with the said subsidiary company upon a resolution to be adopted separately at a meeting of the board of directors of both the controlling company and the subsidiary company by a majority vote of the directors present at the meeting of board of directors attended by directors representing two-thirds of the directors of the respective companies; and the resolutions of merger/consolidation so adopted shall be exempt from the application of the provisions set out in Paragraphs I through III, Article 216 of this Act governing the resolutions of Shareholders' meeting.
After adoption of the resolution by the board of directors of the subsidiary company under the preceding Paragraph, a notice shall be given to each of its shareholders and shall state therein that any shareholder who has an objection against that resolution may, within 30 days or a longer period, submit a written objection requesting the subsidiary company to redeem, at a fair price, the shares of the subsidiary company he holds.
Where the share redemption price is to be decided by an agreement to be reached through negotiation between the subsidiary company and its shareholders under the preceding Paragraph, the subsidiary company shall, within 90 days from the date of adoption of the resolution by the board of directors, effect the payment of the redemption price; whereas, if no agreement on the redemption price is adopted in the foregoing negotiation within 60 days from the date of adoption of the said resolution by the board of directors, the shareholders shall, within 30 days after such 60-day period, apply to the court for its decision on the redemption price by a court ruling.
The request of a shareholder for redemption of shares by the subsidiary company shall become mull and void, if the merger/consolidation resolution is cancelled by the subsidiary company. This clause shall also apply to the case where the shareholder fails to make the requests within the time limit set out in Paragraphs II and III under this Article.
The provisions of Article 317 governing redemption shares held by an objecting shareholder shall not apply the controlling company.
Where the Articles of Incorporation of the controlling company need to be amended after completion of the merger/consolidation project, the provisions of Article 277 hereof shall govern.
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| Article 317 | When a company is split up or to be consolidated or merged with another company, the Board of Directors shall draft a split-up plan or a contract of consolidation or merger in respect of the matters related to such company split-up plan or the consolidation or merger contract and shall submit the same to a meeting of shareholders. Any shareholder who has expressed his dissension, in writing or verbally with a record before or during the meeting, may waive his voting right and request the company to buy back, shares of the split and consolidated or merged company he holds at the prevailing fair price.
In case the another company referred to in the preceding Paragraph is a newly incorporated company, then the meeting of shareholders of the split company shall be regarded as the promoters meeting of the said another company, and election of the directors and supervisors of such new company may be conducted at that meeting.
The provisions of Article 187 and Article 188 of this Act shall apply, mutatis mutandis, to the circumstance specified in the preceding Paragraph.
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| Article 317-1 | The contract of consolidation or merger, as mentioned in Paragraph 1 of the preceding article, shall be made in writing setting forth the following particular:
- The name of the consolidated or merged company and, after the consolidation or merger, the name of the surviving company or the newly incorporated company;
- Total number of shares, kinds of shares and amounts of each kind issued by the surviving company or newly incorporated company as a result of the consolidation or merger;
- Where shares are to be issued to shareholders of the dissolved company by the surviving company or newly incorporated company as a result of consolidation or merger, the total number of new shares, kinds of shares and amount of each kind, method of distribution, together with other relevant matters;
- The relevant provision applicable if the amount of shares to be issued to shareholders of the dissolved company after consolidation or merger is less than the value of one share and payable in cash;
- The Articles of Incorporation of a surviving company must be modified or altered, or that of a newly incorporated company to be executed, in accordance with Article 129.
The aforesaid contract of consolidation or merger shall be sent to shareholders together with the notice to convene a meeting of shareholders for approval of the resolution to be adopted for consolidation or merger.
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| Article 317-2 | The company split-up plan according to Paragraph I, Article 317 shall be reduced to writing and contain the following particulars:
- The changes/alterations need to be made in the Articles of Incorporation of the existing company succeeding the business of the split company, or the full text of the Articles of Incorporation;
- The value of the business, the assets and the liabilities of the split company, and the share swap ratio and calculation basis;
- The total number, categories, and the number in each category of the new shares to be issued by the existing company succeeding the business of the split company or to be issued by the new company to be incorporated;
- The total number, categories, and the number of share in each category of the shares to be acquired by the split company or its shareholders;
- Where the fractional share to be distributed to the split company or its shareholder is to be paid in cash, the relevant provisions governing the process thereof;
- The rights and obligations of the split company to be succeeded by the existing company or by the new company to be incorporated, and the mattes in connection therewith;
- Where the capital stock of the split company is reduced, the matters in connection with such capital reduction;
- The matters which shall be settled in the cancellation of the shares of the split company; and
- Where the company split-up plan is to be carried out jointly by a company and another company, the resolutions of company split-up to be adopted by both companies shall contain the matters pertaining to such joint splitting arrangement.
The company split-up plan as required in the preceding Paragraph shall be disseminated to all shareholders along with the notice of meeting of shareholders which is convened for a resolution on the approval of the company split-up plan.
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| Article 317-3 | (Deleted)
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| Article 318 | After consolidation or merger of a company, the Board of Directors of the surviving company or promoters of the new company shall, after having completed the procedure of serving follow-up notice to creditors and, in case there are shares consolidated as a result of the consolidation or merger transaction, after such consolidation becomes effective or, in the case where shares are not suitable for consolidation, after such shares are disposed of, take the following appropriate procedures respectively as the case may be:
- The surviving company shall at once convene a meeting of the shareholders after consolidation or merger and report on matters of consolidation or merger and, in case of any necessity to modify or alter the Articles of Incorporation, shall also modify or alter the Articles of Incorporation;
- The newly incorporated company shall at once convene a meeting of promoters and draw up the Articles of Incorporation.
The provisions set out in the Articles of Incorporation drawn up under the preceding Paragraph shall not contravene any of the provisions set out in the contract of consolidation or merger.
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| Article 319 | The provisions of Article 73 to 75 shall apply, mutatis mutandis, to the merger/consolidation or split-up of a company limited by shares.
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| Article 319-1 | The surviving company or the new company to be incorporated and succeeding the business of the split company after the company split-up transaction shall, to the extent not exceeding the capital fund contributed by it in respect of the business succeeded by it, assume the joint and several responsibility of discharging the liabilities incurred by the split company prior to the split-up transaction. However, the creditors' right to claim for the performance of the joint and several responsibility of discharging the foregoing liabilities shall become extinguished, if not exercised by the creditors within two year from the date of reference day of the company split-up transaction.
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| Article 320 | (Deleted)
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| Article 321 | (Deleted)
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Section 12.Liquidation
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Subsection 1.Ordinary Liquidation
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| Article 322 | In case of liquidation of a company, the directors shall become its liquidators, unless otherwise provided for in this Act or in the Articles of Incorporation or where other persons are appointed by a meeting of shareholders.
If no liquidator can be determined pursuant to the aforesaid provisions, the court may appoint a liquidator upon the application of any interested person.
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| Article 323 | A liquidator, with the exception of one appointed by the court, may be removed from office by a resolution adopted at a meeting of shareholders.
The court may remove the liquidator upon the application of a supervisor or of shareholders who have been continuously holding more than three percent of the total number of issued shares for a period of one year or more.
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| Article 324 | A liquidator, within the scope of his functions in liquidation, shall have the same rights and obligations as the directors, unless otherwise provided for in this section.
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| Article 325 | The remuneration of a liquidator not appointed by the court shall be determined by a meeting of shareholders, and the remuneration of a liquidator appointed by the court shall be decided by the court.
Liquidation expenses and the remuneration of liquidators shall be immediately paid for from the available assets of the company.
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| Article 326 | The liquidator shall, after having assumed office, examine the financial condition of the company, prepare the financial statements inventory of property, send them to the supervisors for examination, and shall, after such reports, financial statements and inventory of property have been ratified by the meeting of shareholders, submit the same to the court.
The aforesaid statements and records of accounts shall be sent to the supervisors for examination no later than ten days before the date of the meeting of shareholders.
Persons who hinder, refuse or evade the examination conducted by the liquidators under the provisions of Paragraph I of this Article shall be severally subject to a fine not less than NT$ 20,000 but not more than NT$ 100,000.
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| Article 327 | The liquidator after having assumed office, by means of public notice shall, at least three times, urge the creditors to declare their rights of claims within a period of three months, stating also that any creditor failing to declare his rights of claims within the period will not be included in the liquidation, unless the creditor is known to the liquidator, to each known creditor the liquidator shall notify respectively.
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| Article 328 | The liquidator shall not effect performance in favor of any of the creditors during the period fixed for declaring their rights of claims as provided in the preceding article, unless the obligation is a secured one and approval has been obtained from the court for repayment.
To the aforesaid unpaid creditors, the company shall, notwithstanding the provisions of the preceding paragraph1, be liable in damages as may be caused by delay.
In case the assets of the company are apparently sufficient to pay its debts, the aforesaid creditors who may hold the company liable in damage may be first paid with the approval of the court.
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| Article 329 | Creditors who have been excluded from the liquidation may demand performance out of the undivided residual assets of the company; however, this shall not apply where such residual assets have been distributed in accordance with Article 330 and a part of them or the whole has been taken.
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| Article 330 | After the payment of debts, the residual assets shall be distributed among the shareholders in proportion to the number of their shares; however1, in the event that the company has issued special shares and it is otherwise provided for in the Articles of Incorporation, such provisions shall be followed.
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| Article 331 | The liquidator shall, within fifteen days after completion of liquidation, prepare an income and expenditure statement, and a statement of profit and loss, and shall forward the same together with all statements and records of accounts to the supervisors for examination and subsequently submit them to the meeting of shareholders for its ratification.
The meeting of shareholders may appoint another inspector to examine whether the aforesaid statements and records of accounts are in order.
After the statements and records of accounts have been ratified by the meeting of shareholders, they shall be deemed that the company has released the liquidators of their responsibility, except for the responsibility for any unlawful act which has done by the liquidators.
The income and expenditure statement and the statement of profit and loss referred to in Paragraph 1 shall be filed with the court within fifteen days after the approval thereof at the shareholders' meeting.
A liquidator who fails to complete the filing within the given time limit as set forth in the proceeding Paragraph shall be liable for a fine of not less than NT$ 10,000 but not more than NT$ 50,000.
Any person who hinders, refuses or evades the examination referred to in Paragraph II above shall be liable for a fine of not less than NT$ 20,000 but not more than NT$ 100,000.
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| Article 332 | The company shall keep all statements, records of account and documents for a period of ten years from the date of filing a record with the court after the completion of liquidation, and the custodian thereof shall be appointed by the court upon application of the liquidator and other interested persons.
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| Article 333 | If there are assets to be distributed after the completion of liquidation the court may, upon application of interested persons, appoint a liquidator to redistribute such assets.
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| Article 334 | The provisions of Article 83 to 86, Article 87, Paragraph 3 and 4, Article 89 and Article 90 shall apply mutatis mutandis to liquidation of a company limited by shares.
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Subsection 2.Special Liquidation
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| Article 335 | Where circumstances exist which apparently impede the execution of liquidation, the court may, upon the application of any creditor or liquidator or shareholder or ex officio, order the company to institute a process of special liquidation. The same shall apply where there is suspicion that the liabilities of the company exceed assets; but in such a case, only the liquidators may file an application.
Provisions concerning the suspension of procedures of bankruptcy, composition and compulsory execution as specified in Article 294 shall apply mutatis mutandis to the special liquidation.
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| Article 336 | The court may, prior to the order to institute a process of special liquidation upon the application of any of the persons specified in the preceding article or ex officio, first effect any of the dispositions mentioned in Article 339.
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| Article 337 | Whenever any important reason exists, the court may remove a liquidator.
In case of any vacancy among the liquidators or necessity to increase the number of liquidators, the court shall appoint a liquidator.
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| Article 338 | The court may, at any time, order liquidators to report on the business of liquidation and on the state of the property, and may also make any investigation necessary for the supervision of the liquidation.
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| Article 339 | Whenever the court deems necessary for the supervision of the liquidation, it may effect any of the dispositions mentioned in Article 354, Paragraph 1, Item 1, 2 or 6.
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| Article 340 | The company shall discharge its obligations in proportion to the amount of creditors; however, this shall not apply to credits with preferential right of performance or right of exclusion in accordance with law.
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| Article 341 | Whenever it is deemed necessary, the liquidators may, during the process of liquidation, convene a meeting of creditors.
Creditors having rights of claim representing not less than ten percent of the total amount of credits known to the company may request the liquidators to convene a meeting of creditors by filing a written application, stating therein the reasons for convening such a meeting.
The provisions of Article 173, Paragraph 2 shall apply mutatis mutandis to the circumstance specified in the aforesaid paragraph.
The rights of claim of creditors mentioned in the proviso to the preceding article shall not be included in the total amount of credits mentioned in Paragraph 2 hereof.
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| Article 342 | The convener of the meeting of creditors may invite creditors with rights of claims mentioned in the preceding article, paragraph 4, to be present at the meeting of creditors to express opinions with no right to vote.
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| Article 343 | The provisions of Paragraphs Two and Four of Article 172, Paragraphs One to Five of Article 183, Paragraph Two of Article 298; and Article 123 of the Bankruptcy Law shall apply mutatis mutandis to special liquidation.
The convener of the creditors' meeting who violates Paragraph Two of Article 172 as applied mutatis mutandis in the preceding paragraph, or Paragraphs One, Four or Five of Article 183 as applied mutatis mutandis in the preceding paragraph shall be imposed with a fine of not less than NT$10,000 but not more than NT$50,000.
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| Article 344 | The liquidators shall draw up a report on their investigation in the state of the company's business and property, a balance sheet and an inventory of the company, and bring up at the meeting of creditors and shall also state their opinion on the policy for carrying out the liquidation and pre-determined matters.
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| Article 345 | The meeting of creditors may, by resolution, appoint a liquidation inspector and may remove him at any time.
The aforesaid resolution shall have the approval of the court.
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| Article 346 | In doing any of the following acts, the liquidators shall obtain the consent of the liquidation inspector and, if the liquidation inspector does not give consent, they shall convene a meeting of creditors to resolve on the matters; however, this shall not apply if the value involved is not more than one-tenth of one per cent of the total value of assets:
- Disposal of any property of the company;
- Borrowing of money;
- Bringing of an action;
- Agreement to compromise or seek arbitration; or
- Relinquishment of any right.
If, in a case where a resolution of a meeting of creditors is required, there exist urgent circumstances, the liquidators may, with the permission of the court, do any of the acts mentioned in the preceding paragraph.
A liquidator who acts in contravention of the provisions of the preceding two paragraphs shall be jointly liable with the company to a bona fide third party.
The provisions of the proviso to Article 84 paragraph 2 shall not apply to special liquidation.
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| Article 347 | The liquidators may consult the opinion of the liquidation inspector and make a proposal for an agreement of settlement to the meeting of creditors.
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| Article 348 | The terms of an agreement of settlement shall be equal among the creditors; however, this shall not apply to the rights of claim of creditors mentioned in the proviso to Article 340.
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| Article 349 | When it is deemed necessary for the preparation of a draft for an agreement of settlement, the liquidators may request the creditors mentioned in the proviso to Article 340 to participate.
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| Article 350 | An agreement of settlement shall be adopted by the concurrence of the creditors holding three-fourths or more of the total amount of claims with rights to vote at a meeting attended by over one half of the creditors entitled to vote.
The aforesaid resolution shall be approved by the court.
The provisions of Article 136 of the Bankruptcy Law shall apply mutatis mutandis to the agreement of settlement mentioned in Paragraph 1.
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| Article 351 | When it is necessary for carrying out an agreement of settlement, the terms of such agreement may be modified or altered, in which case, the provisions of the preceding four articles shall apply mutatis mutandis.
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| Article 352 | When it is deemed necessary in view of the state of the company's property, the court may order inspection of the company's business and property upon the application of liquidators, the liquidation inspector, shareholders who have been holding three per cent or more of the total number of issued shares continuously for a period of six months or more, creditors who have filed an application for special liquidation, or creditors who have rights of claim representing not less than ten per cent of the total a mount of credits known to the company or of its own motion.
The provisions of Articles 285 shall apply mutatis mutandis to the circumstance mentioned in the preceding paragraph.
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| Article 353 | The inspector shall report to the court the following matters in consequence of the inspection:
- Whether there have been any incidents for which any promoter, director, supervisor, managerial officer or liquidator should be responsible under Article 34, Article 148, Article 155, Article 193 or Article 224;
- Whether a measure to preserve the property of the company is necessary; and
- Whether it is necessary to employ a measure of preservation on the property of any promoter, director, supervisor, managerial officer or liquidator, for the exercise of any claim for damage by the company.
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| Article 354 | When it is deemed necessary, the court may, on the basis of the report mentioned in the preceding article, effect any of the following dispositions:
- Measures of preservation on the property of the company;
- Prohibition against transfer of registered shares;
- Prohibition against release of the responsibilities of any of the promoters, directors, supervisors, managerial officers or liquidators;
- Annulment of the release of the responsibilities of any of the Promoters, directors, supervisors, managerial officers or liquidators; this, however, shall not apply to any release effected one year prior to the institution of the special liquidation other than for any illegal purpose;
- Assessment of any claim for damages arising from the responsibilities of any of the promoters, directors, supervisors, managerial officers or liquidators; and
- Measures of preservation on the property of any of the promoters, directors, managerial officers or liquidators on account of any claim for damages mentioned in the preceding item.
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| Article 355 | If, in cases where an order for the institution of a process of special liquidation has been made, there is no prospect of reaching an agreement of settlement, the court shall ex officio make an adjudication of bankruptcy in accordance with the Bankruptcy Law. The same shall apply where there is no prospect of an agreement of settlement being duly carried out.
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| Article 356 | The provisions pertaining to ordinary liquidation shall apply mutatis mutandis to matters in special liquidation if not provided for in this sub-section.
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Section 13 Close Company |
| Article 356-1 | A close company is a non public offering company whose shares shall be held by not more than 50 persons, and whose Articles of Incorporation shall impose restrictions on transfer of shares of a company .
The central competent authority shall as necessary in view of the socio- economic situation and the actual needs increase the number of shareholders referred to in the preceding Paragraph; the method of calculation and scope of qualification of the shareholders shall be prescribed by the central competent authority.
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| Article 356-2 | A close company shall explicitly describe its nature of "closeness" in its Articles of Incorporation and the central competent authority shall make such a nature public on its information website.
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| Article 356-3 | A close company shall be formed by the agreement of all promoters and the promoters shall fully subscribe in the first issue of the total number of shares.
Equity capital to be contributed other than cash by the promoters may be in the form of assets required in the business of a close company , technical know-how, or service, provided, however, that equity capital to be contributed by service shall not exceed a certain percentage of the total shares issued by a close company .
The certain percentage set forth in the preceding Paragraph shall be prescribed by the central competent authority.
Equity capital to be contributed by technical know-how or service shall be agreed by all shareholders, and the kinds, amount of such capital contribution and the number of shares allotted to the subscriber by a close company shall be explicitly described in its Articles of Incorporation; the competent authority shall register such particulars in accordance with the Articles of Incorporation and shall make such particulars public on its information website.
The provisions of Article 198 shall apply mutatis mutandis to the election of directors and supervisors by the promoters in a close company , unless otherwise provided for in the Articles of Incorporation.
Articles of 132 through 149 and Articles 151 through 153 shall not apply to the formation of a close company .
The provision of Article 198 shall apply to the election of directors and supervisors in the shareholders' meeting of a close company, unless otherwise provided for in the Articles of Incorporation.
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| Article 356-4 | A close company shall make no public offering of any of its securities, provided, however, that this provision shall not apply to the crowd-funding portal operated by securities businesses approved by the competent authority in charge of securities affairs.
The proviso to the preceding Paragraph shall still be subject to the restrictions on the number of shareholders and transfer of shares imposed by the Articles of Incorporation set forth in Article 356-1.
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| Article 356-5 | The restrictions on transfer of shares shall be explicitly described in the Articles of Incorporation of a close company.
The restrictions on transfer of shares set forth in the preceding Paragraph shall be conspicuously annotated on a close company ’s printed share certificates; if a company does not issue shares, an assignor shall state such restrictions on the relevant written documentation delivered to the assignee.
The assignee referred to in the preceding Paragraph may request the company to deliver a copy of its Articles of Incorporation.
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| Article 356-6 | (Deleted)
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| Article 356-7 | Where a close company is to issue special shares, it shall include in its Articles of Incorporation provisions concerning:
- Order, fixed amount or fixed ratio of allocation of dividends and bonus on special shares;
- Order, fixed amount or fixed ratio of allocation of surplus assets of the company;
- Order of or restriction on, no voting right, multiple voting right, or veto power over specific matters on the exercise of voting power by special shareholders;
- Any prohibition or restriction regarding special shareholders’ rights of being elected as directors and/or supervisors or rights of electing a certain amount of seats of directors and supervisors;
- Number, method or formula for special shares to be converted into common shares;
- Restrictions on transfer of special shares; and
- Other matters concerning rights and obligations incidental to special shares.
Paragraph Two of Article 157 shall not apply to multiple voting rights of special shareholders as set forth in Item Three of the preceding paragraph.
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| Article 356-8 | A close company may explicitly provide in its Articles of Incorporation that its shareholders’ meeting can be held by means of visual communication network or other methods promulgated by the central competent authority. Under the circumstances of calamities, incidents, or force majeure, the central competent authority may promulgate a ruling that authorizes a company, which has no above provision in its Articles of Incorporation, within a certain period of time can hold its shareholders’ meeting by means of visual communication network or other promulgated methods.
In case a shareholders’ meeting is proceeded via visual communication network, then the shareholders taking part in such a visual communication meeting shall be deemed to have attended the meeting in person.
A close company may explicitly provide in its Articles of Incorporation that if it is agreed by all its shareholders, any action to be taken at a shareholders' meeting may be taken, without a meeting, by written consents to exercise their voting power.
A shareholders' meeting held in accordance with the preceding Paragraph shall be deemed to have been convened; the shareholders who exercise their voting power by written consents shall be deemed to have attend the meeting in person.
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| Article 356-9 | Shareholders of a close company may reach a voting agreement in writing to jointly exercise their voting rights or may form a voting trust where the voting trustee will exercise the voting power based upon the terms and conditions stated in such a written voting trust agreement.
The trustee referred to in the preceding Paragraph shall be a shareholder unless otherwise provided for in its Articles of Incorporation.
A voting trust cannot be set up as a defense against the close company unless the written voting trust agreement referred to in the first Paragraph, the name or title, office, residence or domicile of each shareholder, and the total number, kind and amount of shares transferred to the voting trust have been delivered to the company for registration 30 days prior to a regular shareholders’ meeting or 15 days prior to a special shareholders' meeting.
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| Article 356-10 | (Deleted)
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| Article 356-11 | A private placement of corporate bonds by a close company shall be adopted by a majority of directors at a meeting attended by two-thirds or more of the total number of directors.
A private placement of convertible corporate bonds or corporate bonds with warrants by a close company shall be adopted by both the resolution of a meeting of board of directors set forth in the preceding Paragraph and the resolution of a shareholders’ meeting, provided, however, if the provisions of its Articles of Incorporation require no resolution of a shareholders’ meeting, such provisions shall govern.
The restrictions on number of shareholders and transfer of shares imposed by the Articles of Incorporation set forth in Article 356-1shall still apply after the holders of corporate bonds exercising their conversion rights or warrants.
The provisions of Article 246, Article 247, Paragraph 1 and Paragraphs 4 through 7 of Article 248, Article 248-1, Articles 251 through 255, Article 257-2, Article 259, and Paragraph 1 of Article 257 regarding certification of corporate bonds shall not apply to the issuance of corporate bonds provided in Paragraph 1 and Paragraph 2 of this Article.
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| Article 356-12 | The issuance of new shares of a close company shall be adopted by a majority of directors at a meeting attended by two-thirds or more of the total number of directors, unless otherwise provided for in its Articles of Incorporation.
Paragraphs 2 through 4 of Article 356-3 shall apply mutatis mutandis to the contribution of equity capital for subscribing new shares. In addition, such contribution can also be made in the form of monetary credit extended to the close company .
Article 267 shall not apply to the issuance of new shares referred to in Paragraph 1 of this Article.
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| Article 356-13 | A close company may voluntarily change its status into a non close company by a resolution adopted, at a shareholders’ meeting, by a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares.
Where stricter criteria for the total number of attending shareholders and for the number of votes required to adopt a resolution at a shareholders’ meeting referred to in the preceding Paragraph are specified in the Articles of Incorporation of a close company, such stricter criteria shall govern.
In any event that a close company fails to meet the requirements set forth in Article 356-1, the company shall change its status into a non close company and shall apply for a necessary alteration registration in respect of such change accordingly.
If a close company fails to apply for an alteration registration in accordance with the preceding Paragraph, the competent authority may order it to rectify such violation within a given time limit and impose successively in each case a fine based on Paragraph Five of Article 387; where the violation is of a severe nature, the competent authority may, ex officio, order the dissolution of a company.
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| Article 356-14 | A non public offering company may change its status into a close company by the unanimous consent of its shareholders.
After the unanimous consent of its shareholders provided in the preceding Paragraph, the company shall immediately notify each of its creditors and make a public announcement.
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