Chapter II Protection of Shareholders' Rights and Interests
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Section 1 Encouraging Shareholders to Participate in Corporate Governance
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| Article 4 | When implementing the corporate governance system, a securities firm shall protect shareholders' rights and interests and treat all shareholders fairly.
A securities firm shall establish a corporate governance system which ensures shareholders' right of being fully informed of, participating in and making decisions over important matters of the company.
Shareholders' meetings in accordance with the rules for the meetings.
Resolutions adopted by shareholders' meetings of securities firms shall comply with laws, regulations and articles of incorporation.
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| Article 5 | A securities firm shall convene shareholders' meetings in accordance with the regulations under the Company Act and other applicable laws, and establish comprehensive meeting procedure rules, and strictly follow the meeting procedure rules in handling matters to be resolved at a shareholders' meeting.
When a securities firm whose shares are not publicly offered convenes a shareholders’ meeting, it is not advised to directly hold a teleconference in accordance with Article 172-2, paragraphs 1 and 2 of the Company Act or to hold the meeting in accordance with Article 175-1, paragraphs 1 and 2 of the Company Act, which govern shareholders’ voting rights, without the approval of the competent authority.
Resolutions made at the shareholders' meeting of a securities firm shall be consistent with the requirements of laws and regulations and the articles of incorporation.
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| Article 6 | The board of directors of a securities firm shall properly arrange the proposals and agenda of shareholders' meetings, and formulate the principles and procedures for shareholder nominations of directors and supervisors and submissions of shareholder proposals. The board shall also properly handle proposals duly submitted by shareholders. Arrangements shall be made to hold shareholders meetings at a convenient location, with sufficient time allowed and sufficient numbers of suitable personnel assigned to handle attendance registrations. No arbitrary requirements shall be imposed on shareholders to provide additional evidentiary documents beyond those showing eligibility to attend. Shareholders shall be granted reasonable time to deliberate each proposal and afforded an appropriate opportunity to make statements.
It would be advisable for shareholders' meetings convened by the board of directors to be chaired by the chairman of the board of directors and attended by a majority of the directors.
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| Article 7 | A securities firm shall encourage its shareholders to actively participate in its corporate governance and hold shareholders' meetings on the premise of legal, effective and safe proceedings. A securities firm shall seek all ways and means, including fully exploiting technologies for information disclosure and vote casting, so as to enhance the attendance rate of shareholders at the shareholders' meeting and ensure the exercise of shareholders' rights by shareholders at the shareholders' meeting in accordance with laws.
When adopting electronic voting at its shareholders' meeting, a securities firm is advised against submitting an extempore motion and a motion to amend the existing proposal at shareholders' meeting.
A securities firm is advised to assist shareholders in voting on proposals submitted to the shareholders' meeting one after another.
When a securities firm provides giveaways in respect of a shareholders' meeting to its shareholders, there should be no different treatment or discrimination against shareholders.
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| Article 8 | A securities firm shall record the minutes of the shareholders' meeting the date, month and year of the meeting, venue of the meeting, chairperson's name and how a proposal was resolved, as well as the summary information about how the meeting was proceeded and the result of the meeting in accordance with the Company Act and other applicable laws and regulations. With respect to the election of directors and supervisors, the meeting minutes shall record the method of voting adopted therefore and the total number of votes for the directors or supervisors who were elected.
The minutes of the shareholders' meeting shall be properly and perpetually kept by the company during its legal existence. It would be advisable for a securities firm to fully disclose such meeting minutes on its website, if any.
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| Article 9 | The chairman of the shareholders' meetings shall be fully familiarized and comply with the rules governing the proceedings of the shareholders' meetings established by the company. The chairman shall ensure the proper progress of the proceedings of the meetings and may not adjourn the meetings at will.
In order to protect the interests of shareholders owning a significant portion of shares, if the chairman declares the adjournment of the meeting in a manner in violation of rules governing the proceedings of the shareholders' meetings, it would be advisable for the members of the board of directors other than the chairman of the shareholders' meeting to promptly assist the attending shareholders at the shareholders' meeting in electing a new chairman of the shareholders' meeting to continue the proceedings of the meeting, by a resolution to be adopted by a majority of the votes represented by the shareholders attending the said meeting in accordance with the legal procedures.
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| Article 10 | A securities firm shall respect the shareholders' right to know. With respect to the information of the financial conditions, operations, the insiders' shareholdings, and corporate governance status in the company, a securities firm shall faithfully comply with the applicable regulations regarding the information disclosure. If an official website is set up, a securities firm is advised to provide information to the shareholders regularly and promptly.
The information mentioned in the preceding paragraph shall be disclosed in English upon release, to ensure fair treatment to all shareholders.
To protect shareholders’ rights and interests and ensure fair treatment to shareholders, a securities firm shall lay down bylaws to forbid its internal personnel to make use of information not released on the market to trade securities.
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| Article 11 | The shareholders shall be entitled to profit distributions by the company. In order to ensure the shareholders' investment interests, the shareholders' meeting may according to Article 184 of the Company Act, examine the statements and books prepared and submitted by the board of directors and the audit reports submitted by the audit committee or supervisors, and may decide, by resolution, profit distributions and deficit off-setting plans. In order to proceed with the above examination, the shareholders' meeting may appoint an inspector.
The shareholders may, according to Article 245 of the Company Act, apply with the court to select an inspector in examining the accounting records, assets, special matters, and special transaction documents and records of the company.
The board of directors, audit committee or supervisors and managers of a securities firm shall fully cooperate in the examination conducted by the inspectors in the aforesaid two paragraphs without any obstruction, rejection or circumvention.
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| Article 12 | In entering into material financial and business transactions such as acquisition or disposal of assets, engaging in derivatives products transactions, lending funds of the company to any other person, making endorsements or providing guarantees to any other person, a securities firm shall proceed in accordance with the applicable laws and/or regulations. A securities firm shall further establish the operating procedures in relation to these material financial and business transactions and report the same to the shareholders' meeting for its approval so as to protect the interests of the shareholders.
In the event that a securities firm is the target of merger or tender offer, which shall be proceeded with the applicable laws and regulations, the securities firm shall pay attention to the fairness and adequacy of the merger or tender offer plan and the transaction, as well as information disclosure and soundness of the company's financial structure after the merger or tender offer.
A securities firm's staff responsible for matters pertaining to what is described in the preceding paragraph shall be careful about issues of conflict of interest and when they should abstain.
When making investments, a securities firm is advised to consider the corporate governance of the company issuing the underlying investments to set up its rules to be followed when making investments.
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| Article 13 | In order to protect the interests of the shareholders, it would be advisable for a securities firm to designate responsible personnel dedicated to handling shareholders' proposals, inquiries or disputes.
A securities firm shall properly deal with matters arising from any action instituted by shareholders pursuant to the applicable laws claiming damage to such shareholders' interests caused by the resolution adopted in its shareholders' meetings or the board of directors meetings in violation of the applicable laws, regulations or the company's articles of incorporation, or claiming breach by the company's directors, supervisors or managers of applicable laws, regulations or the company's articles of incorporation in performing their duty.
A securities firm is advised to establish the internal operation procedure to properly handle matters in the preceding two paragraphs and shall maintain written records thereof for recordation, which will be included in the internal control system for control and management.
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Section 2 Establishment of Methods to Interact with Shareholders
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| Article 13-1 | The board of directors of a securities firm shall have the responsibilities to establish methods to interact with the firm's shareholders to improve their mutual understanding of the development of the company's objectives.
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| Article 13-2 | In addition to communications with shareholders at shareholders' meetings and encouragement of shareholders to attend shareholders' meetings, the board of directors of a securities firm shall adopt effective methods to communicate with shareholders, and work with managers and independent directors to understand the opinions of shareholders and issues they concern about, and to clearly explain the company's policies to win the shareholders' support.
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Section 3 Corporate Governance Relationships Between the Company and Its Affiliated Ente |
| Article 14 | A securities firm shall clearly identify its management objectives and the allocation of authorities and responsibilities over personnel, assets and financial matters of its affiliated enterprises, and shall conduct risk evaluation and establish appropriate firewalls.
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| Article 15 | Unless otherwise provided by the laws and regulations, a manager of a securities firm may not serve as a manager of its affiliated enterprises.
A director, who engages in any transaction for himself or on behalf of another person that is within the scope of the company's business, shall disclose to the shareholders' meeting the material terms of such transaction and obtain its consent.
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| Article 16 | A securities firm shall establish the objectives and system of a sound management for finance, operations and accounting in accordance with the applicable laws and regulations. It shall further, together with its affiliated enterprises, properly conduct an overall risk evaluation of the major banks they are dealing with, their customers and their suppliers, and carry out the necessary control mechanism to reduce credit risks.
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| Article 17 | Where a securities firm and its affiliated enterprises enter into inter-company business transactions, a written agreement governing respect of the relevant financial and business operations between each other shall be made in accordance with the principle of fair dealing and reasonableness. Both parties shall definitively stipulate the terms and conditions of the price and payment terms mechanism, and desist from any transactions that are other than at arms' length.
All transactions or contracts made by and between a securities firm and its affiliated persons and shareholders shall follow the principles set forth in the proceeding sub-paragraph and tunneling of profits in strictly prohibited.
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| Article 18 | A shareholder having controlling power over a securities firm shall comply with the following provisions:
- It shall bear a duty of good faith to other shareholders and shall not directly or indirectly cause the company to engage in transactions at other than arms' length or involve in management conduct for adverse interest.
- Its representative shall follow the rules implemented by the securities firm with respect to the exercise of rights and participation of resolution, so that at a shareholders' meeting, the representative shall exercise his/her voting right for the best interest of all shareholders and in good faith and, when acting as a director or supervisor, he/she will exercise the fiduciary duty of a director or supervisor.
- It shall comply with relevant laws, regulations and the articles of incorporation of the company in nominating directors or supervisors and shall not act beyond the authority granted by the shareholders meeting or board meeting.
- It shall not improperly intervene in corporate policy making or obstruct corporate management activities.
- It shall not restrict or impede the management of the company by methods of unfair competition.
- The corporate representative appointed by it after it was elected as director or supervisor shall have the professional qualifications required by the company, and it shall not replace the representative unless there is a good reason.
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| Article 19 | A securities firm shall ensure the command at any time of information of the identity of major shareholders or its ultimate control persons who own a higher percentage of shares and have actual control over the company.
A securities firm shall disclose from time to time important information about its major shareholders relating to the pledge, increase or decrease of shares, or other matters that may possibly trigger a change in the ownership of their shares.
The major shareholder indicated in the first paragraph refers to the one who owns five percent or more of the outstanding shares of the company or the shareholding stake thereof is on the top ten list, provided however that the company may set up a lower shareholding threshold according to the actual shareholding stake that may control the company.
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