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Title:

Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies  CH

Amended Date: 2020.02.13 
Categories: Corporate Governance

Title: Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies(2012.11.22)
Date:
   Chapter I General Principles
Article 1    In order to assist companies listed on the Taiwan Stock Exchange Corporation ("TWSE") and the GreTai Securities Market ("GTSM", collectively referred to as
    "TWSE/GTSM listed companies") to establish a sound corporate governance system, and to promote the integrity of the securities market, the TWSE and GTSM hereby jointly adopt these Principles to be followed by TWSE/GTSM listed companies.
    TWSE/GTSM listed companies are advised to promulgate their own corporate governance principles in accordance with these Principles.
Article 2    When setting up the corporate governance system, in addition to complying with relevant laws, regulations, articles of incorporation, contracts signed with the TWSE or GTSM and other relevant regulations, a TWSE/GTSM listed company shall follow the following principles:
  1. Establish an effective corporate governance framework.
  2. Protect the rights and interests of shareholders.
  3. Strengthen the powers of the board of directors.
  4. Fulfill the function of supervisors.
  5. Respect the rights and interests of stakeholders.
  6. Enhance information transparency.

Article 3    A TWSE/GTSM listed company shall follow the Criteria Governing Establishment of Internal Control System by Public Reporting Companies and take into consideration the overall operational activities of itself and its subsidiaries in establishing an effective internal control system, and review it at all times, in order to ensure the continued effectiveness of its design and implementation in light of changes in the Company's internal and external environment.
    If the company has elected independent directors, the adoption or amendment to its internal control system shall be submitted to the board of directors for approval by resolution unless an approval has been obtained from the competent authority; when an independent director has a dissenting opinion or qualified opinion, it shall be noted in the minutes of the directors meeting; however if the company has established an audit committee in accordance with the Securities and Exchange Act, the adoption or amendment to its internal control system shall be subject to the consent of one-half or more of all audit committee members and be submitted to the board of directors for a resolution.
    In addition to fully performing voluntary reviews of the internal control system by a TWSE/GTSM listed company, its board of directors and the management shall review the result of the voluntary reviews of each department and the report of the internal audit department at least annually. Supervisors shall also pay attention to and exercise supervision over this matter. Directors and supervisors shall periodically hold seminars with the internal auditor with respect to the problems and review of the internal control system, and minutes of which shall be produced. If the company has established an audit committee in accordance with the Securities and Exchange Act, the assessment of the effectiveness of the internal control system shall be subject to the consent of one-half or more of all audit committee members and be submitted to the board of directors for approval.
    The management of a TWSE/GTSM listed company shall pay special attention to the internal audit department and its personnel, fully empower them and urge them to conduct audits effectively, evaluate problems of the internal control system and assess the efficiency of operations to ensure that such system can be carried out effectively on an on-going basis and may assist the board of directors and the management to perform their duties effectively so as to ensure a sound corporate governance system.
    To put the internal control system into effect, strengthen the professional abilities of the agent of the internal auditor and to further improve and maintain the quality and implementing result of the audit, a TWSE/GTSM listed company shall have a deputy in place for the internal auditing personnel.
    The qualification requirements on the internal auditor set out in Article 11, paragraph 3 of the Criteria Governing Establishment of Internal Control System by Public Reporting Companies and Articles 16, 17, and 18 of the same Criteria shall apply mutatis mutandis to the deputy as referred to in the preceding paragraph.
   Chapter II Protection of Shareholders’ Rights and Interests
      Section 1 Encouraging Shareholders to Participate in Corporate Governance
Article 4    When implementing the corporate governance system, a TWSE/GTSM listed company shall take the protection of shareholders??rights and interests as its foremost goal and treat all shareholders fairly.
    A TWSE/GTSM listed company shall establish a corporate governance system which ensures shareholders??rights of being fully informed of, participating in and making decisions over important matters of the company.
Article 5    A TWSE/GTSM listed company shall convene shareholders meetings in accordance with the Company Law and relevant laws and regulations and provide comprehensive rules for such meetings. TWSE/GTSM listed companies shall faithfully implement resolutions adopted by shareholders meetings in accordance with the rules for the meetings.
    Resolutions adopted by shareholders meetings of TWSE/GTSM listed companies shall comply with laws, regulations and articles of incorporation.
Article 6    The board of directors of a TWSE/GTSM listed company shall properly arrange shareholders meeting discussion topics and procedures. Shareholders shall be granted reasonable time to deliberate each proposal and afforded an appropriate opportunity to make statements.
    For the shareholders meetings that are convened by the board of directors, it would be advisable for a majority of the directors to attend the meeting in person.
Article 7    A TWSE/GTSM listed company 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 TWSE/GTSM listed company shall seek all ways and means, including fully exploiting technologies for information disclosure, 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.
    A TWSE/GTSM listed company that employs electronic voting at a shareholders meeting is advised to adopt the candidate nomination system for elections of directors and supervisors, and to avoid raising of extraordinary motions and amendments to original proposals.
    TWSE/GTSM listed companies are advised to arrange for their shareholders to vote by poll on the proposals included in the shareholders meeting agenda one by one and enter the voting results, namely the numbers of votes cast "For" and "Against" and the number of "Abstentions," for each proposal, after the shareholders meeting on the same day that it is held, into the Internet information reporting system designated by the TWSE.
    If the company distributes souvenirs at its shareholders meeting, it shall not practice differential treatment or discrimination.
Article 8    A TWSE/GTSM listed company shall, in accordance with the Company Act and other applicable laws and regulations, record in the shareholders meeting minutes 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. 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 elected directors or supervisors.
    The shareholders meeting minutes shall be properly and perpetually kept by the company during its legal existence, and should be sufficiently disclosed on the Company's website.
Article 9    The chairman of the shareholders meetings shall be fully familiar 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 most shareholders, 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.
Article 10    A TWSE/GTSM listed company shall place high importance on shareholders??rights to know, and faithfully comply with the applicable regulations regarding the information disclosure to provide, regularly and timely, the shareholders with information relating to the financial conditions and operations, the insiders' shareholdings, and corporate governance status in the company by utilizing the Market Observatory Post System or the website established by the company.
Article 11    The shareholders shall be entitled to profit distributions by the company. In order to ensure the investment interests of shareholders, the shareholders meeting may, pursuant 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 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, pursuant to Article 245 of the Company Act, apply with the court to select an inspector in examining the accounting records and assets of the company.
    The board of directors, supervisors and managers of the TWSE/GTSM listed company shall fully cooperate in the examination conducted by the inspectors in the aforesaid two paragraphs without any obstruction, rejection or circumvention.
Article 12    In entering into material financial and business transactions such as acquisition or disposal of assets, lending funds, and making endorsements or providing guarantees, a TWSE/GTSM listed company shall proceed in accordance with the applicable laws and/or regulations and establish operating procedures in relation to these material financial and business transactions which shall be reported to and approved by the shareholders meeting so as to protect the interests of the shareholders.
    When a TWSE/GTSM listed company involves in a management buyout, in addition to proceeding in accordance with the applicable laws and/or regulations, it is advisable to establish an objective and independent committee to review the rationality of the acquisition price and the acquisition plan, as well as pay attention to the regulations regarding the information disclosure.
    The relevant personnel of a TWSE/GTSM listed company handling the matters in the preceding paragraph shall pay attention to the event of conflict of interest and the avoidance from the same.
Article 13    In order to protect the interests of the shareholders, it would be advisable for a TWSE/GTSM listed company to designate personnel exclusively dedicated to handling proposals by, inquiries from, and disputes relating to its shareholders.
    A TWSE/GTSM listed company shall properly deal with matters arising from any action instituted by shareholders pursuant to the applicable laws claiming damage to such shareholders' rights and interests caused by the resolution adopted in its shareholders meetings or the board of directors meetings in violation of the applicable laws, regulations or its articles of incorporation, or claiming a breach by its directors, supervisors or managers of applicable laws, regulations or the company's articles of incorporation in performing their duties.
      Section 2 Corporate Governance Relationships Between the Company and Its Affiliated Enterprise
Article 14    A TWSE/GTSM listed company shall clearly identify the allocation of its management authorities and responsibilities over personnel, assets and financial matters of its affiliated enterprises, and shall conduct risk evaluation and establish appropriate firewalls.
Article 15    Unless otherwise provided by the laws and regulations, a manager of a TWSE/GTSM listed company 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 operations, shall explain the major content of such actions to the shareholders meeting and obtain its consent.
Article 16    A TWSE/GTSM listed company shall establish a sound management system for finance, operations and accounting in accordance with the relevant 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.
Article 17    Where a TWSE/GTSM listed company and its affiliated enterprises enter into inter-company business transactions, a written agreement governing the relevant financial and business operations between each other shall be made in accordance with the principle of fair dealing and reasonableness. Price and payment terms shall be definitively stipulated when contracts are signed, and non-arm's length transactions shall be prohibited.
    All transactions or contracts made by and between a TWSE/GTSM listed company and its affiliated persons and shareholders shall follow the principles set forth in the preceding paragraph and tunneling of profits is strictly prohibited.
Article 18    A corporate shareholder having controlling power over a TWSE/GTSM listed company shall comply with the following provisions:
  1. It shall bear a duty of good faith to other shareholders and shall not directly or indirectly cause the company to conduct any business which is contrary to normal business practice or not profitable.
  2. Its representative shall follow the rules implemented by its company 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 exercise the fiduciary duty and duty of care of a director or supervisor.
  3. 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.
  4. It shall not improperly intervene in corporate policy making or obstruct corporate management activities.
  5. It shall not restrict or impede the management or production of the company by methods of unfair competition such as monopolizing corporate procurement or foreclosing sales channels.

Article 19    A TWSE/GTSM listed company shall ensure the command at any time of information on the identity of major shareholders, who own a higher percentage of shares and have an actual control over the company, and its ultimate control persons.
    A TWSE/GTSM listed company shall disclose periodically important information about its shareholders holding more than 10 percent of the outstanding shares of the company relating to the pledge, increase or decrease of share ownership, 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 those who owns 5 percent or more of the outstanding shares of the company or the shareholding stake thereof is on the top 10 list, provided however that the company may set up a lower shareholding threshold according to the actual shareholding stake that may control the company.
   Chapter III Enhancing the Function of Board of Directors
      Section 1 Structure of Board of Directors
Article 20    The board of directors of a TWSE/GTSM listed company shall be responsible to the shareholders meetings. Procedures and arrangement relating to corporate governance shall ensure that, in exercising its authority, the board of directors will comply with laws, regulations, articles of incorporation, and the resolutions of shareholders meetings of the company.
    Regarding the structure of the board of directors, a TWSE/GTSM listed company shall determine an appropriate number of board members not less than five persons, in consideration of its business scale, the shareholding of its major shareholders and practical operational needs.
    The board members shall have the necessary knowledge, skill, and experience for performing their duties. To achieve the ideal goal of corporate governance, the board of directors shall possess the following abilities:
  1. Ability to make operational judgment.
  2. Ability to perform accounting and financial analysis.
  3. Ability to conduct management administration.
  4. Ability to conduct crisis management.
  5. Industrial knowledge.
  6. International market perspective.
  7. Ability to lead.
  8. Ability to make decisions.

Article 21    A TWSE/GTSM listed company shall establish a fair, just, and open procedure for the election of directors, and shall adopt the cumulative voting mechanism pursuant to the Company Act in order to fully reflect shareholders' views.
    Unless otherwise the competent authority grants an approval, a spousal relationship or a familial relationship within the second degree of kinship may not exist among more than half of the directors of a TWSE/GTSM listed company.
    Where the number of directors falls below five due to the release of director(s) for any reason, the company shall hold a by-election for director at the next following shareholders meeting. Where the number of directors falls short by one-third of the total number prescribed by the articles of incorporation, the company shall convene a special shareholders meeting within 60 days of the occurrence of that fact for a by-election for director(s).
    The aggregate shareholding percentage of all of the directors of a TWSE/GTSM listed company shall comply with the laws and regulations. Restrictions on the share transfer of each director and the creation, release, or changes of any pledges over the shares held by each director shall be subject to the relevant laws and regulations, and the relevant information shall be fully disclosed.
Article 22    A TWSE/GTSM listed company is advised to specify in its Articles of Incorporation that it adopts the candidate nomination system for elections of directors pursuant to the Company Act, and to review in advance the qualifications, education, working experience, background, and the existence of any other matters set forth in Article 30 of the Company Act with respect to the director candidates recommended by shareholders or directors, and to provide the results of the review to shareholders for their reference, so that qualified directors will be elected.
Article 23    Clear distinctions shall be drawn between the responsibilities and duties of the chairman of the board of a TWSE/GTSM listed company and those of its general manager.
    It would be inappropriate for the chairman to also act as the general manager. If the chairman also acts as the general manager or they are spouses or relatives within one degree of consanguinity, it would be advisable that the number of independent directors be increased.
      Section 2 Independent Director System
Article 24    A TWSE/GTSM listed company shall appoint independent directors in accordance with its articles of incorporation not less than two in number and not less than one-fifth of the total number of directors.
    Independent directors shall possess professional knowledge and there shall be restrictions on their shareholdings and the positions they may concurrently hold. They shall maintain independence within the scope of their directorial duties, and may not have any direct or indirect interest in the company.
    A TWSE/GTSM listed company shall, in accordance with Article 192-1 of the Company Act, adopt a candidate nomination system for election of the independent directors and expressly stipulate such system in the articles of incorporation; and the shareholders shall elect the directors from among the nominees listed in the roster of director candidates. Independent and non-independent directors shall be elected at the same time but on separate ballots pursuant to Article 198 of the Company Act.
    If a TWSE/GTSM listed company and its group enterprises and organizations, and another company and its group enterprises and organizations nominate for each other any director, supervisor or managerial officer as a candidate for an independent director of the other, the TWSE/GTSM listed company shall, at the time it receives the nominations for independent directors, disclose the fact and explain the suitability of the candidate for independent director. If the candidate is elected as an independent director, the TWSE/GTSM listed company shall disclose the number of votes cast in favor of the elected independent director.
     The "group enterprises and organizations" in the preceding paragraph comprise the subsidiaries of the TWSE/GTSM listed company, any foundation to which the TWSE/GTSM listed company's cumulative direct or indirect contribution of funds exceeds 50 percent of its endowment, and other institutions or juristic persons that are effectively controlled by the company.
    Change of status between independent directors and non-independent directors during their term of office is prohibited.
    If an independent director is released for any reason, resulting in a number of directors lower than that required under paragraph 1 or the articles of incorporation, a by-election for independent director shall be held at the next shareholders meeting. In the event that all the independent directors have been released, the company shall convene a special shareholders meeting to hold a by-election within 60 days from the date on which the vacancies arose.
    Where a TWSE/GTSM listed company has created the position of managing director, the managing directors shall include no less than one independent director, and no less than one-fifth of the managing director seats shall be held by independent directors.
    The professional qualifications, restrictions on both shareholding and concurrent positions held, determination of independence, method of nomination and other requirements with regard to the independent directors shall be set forth in accordance with the Securities and Exchange Act, the Regulations Governing Appointment of Independent Directors and Compliance Matter for Public Companies, and the rules and regulations of the Taiwan Stock Exchange or GreTai Securities Market.
Article 25    When a company has elected independent directors, the following matters shall be submitted to the board of directors for approval by resolution unless approval has been obtained from the competent authority; when an independent director has a dissenting opinion or qualified opinion, it shall be noted in the minutes of the directors meeting:
  1. Adoption or amendment of the internal control system pursuant to Article 14-1 of the Securities and Exchange Act.
  2. Adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, of handling procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, or endorsements or guarantees for others.
  3. A matter bearing on the personal interest of a director or a supervisor.
  4. A material asset or derivatives transaction.
  5. A material monetary loan, endorsement, or provision of guarantee.
  6. The offering, issuance, or private placement of any equity-type securities.
  7. The hiring or release of a certifying CPA, or the compensation given thereto.
  8. The appointment or discharge of a financial, accounting, or internal auditing officer.
  9. Any other material matter so required by the competent authority.

Article 26    A TWSE/GTSM listed company shall stipulate the scope of duties of the independent directors and empower them with manpower and physical support related to the exercise of their power. The company or other board members shall not restrict or obstruct the performance of duties by the independent directors.
    A TWSE/GTSM listed company shall stipulate the remuneration of the directors in its articles of incorporation or approve the same in a shareholders meeting. The remuneration of the directors shall fully reflect the personal performance and the long-term management performance of the company, and shall also take the overall operational risks of the company into consideration. Different but reasonable remuneration from that of other directors may be set forth for the independent directors.
    When a TWSE/GTSM listed company, under its articles of incorporation, or by resolution of its shareholders meeting, or by order of the competent authority, sets aside a certain proportion of earnings as special reserve, such allocation shall be made after the allocation of legal reserve and before the distribution of director and supervisor compensation and employee bonuses, and the company shall provide in the articles of incorporation the method to be adopted for distributing earnings when reversal of the special reserve is added into the undistributed earnings.
      Section 3 Audit Committee and Other Functional Committees
Article 27    For the purpose of developing supervision functions and strengthening management mechanisms, the board of directors of a TWSE/GTSM listed company may, taking into account the size of the board and the number of the independent directors, set up audit, nomination, risk management or any other functional committees, and based on the beliefs in corporate social responsibility and sustainable operation, set up an environmental protection or other committees, and have them stipulated in the articles of incorporation.
    Functional committees shall be responsible to the board of directors and submit the proposals to the board of directors for approval; provided that the performance of supervisor's duties by the audit committee pursuant to Article 14-4, paragraph 4 of the Securities and Exchange Act shall be excluded.
    Functional committees shall adopt an organizational charter to be approved by the board of directors. The organizational charter shall contain the number, term of office, and power of committee members, as well as the meeting rules and resources to be provided by the company for exercise of power by the committee.
Article 28    A TWSE/GTSM listed company shall establish either an audit committee or a supervisor.
    The audit committee shall be composed of the entire number of independent directors. It shall not be fewer than three persons in number, one of whom shall be convener, and at least one of whom shall have accounting or financial expertise.
    For a company that has established an audit committee, the provisions regarding supervisors in the Securities and Exchange Act, the Company Act, other laws and regulations, and these Principles shall apply mutatis mutandis to the audit committee.
    For a TWSE/GTSM listed company that has established an audit committee, Article 25 herein does not apply to the following matters, which shall be subject to the consent of at least one half or more of all audit committee members and be submitted to the board of directors for a resolution:
  1. Adoption or amendment of internal control system pursuant to Article 14-1 of the Securities and Exchange Act.
  2. Assessment of the effectiveness of the internal control system.
  3. Adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, of handling procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, or endorsements or guarantees for others.
  4. A matter bearing on the personal interest of a director.
  5. A material asset or derivatives transaction.
  6. A material monetary loan, endorsement, or provision of guarantee.
  7. The offering, issuance, or private placement of any equity-type securities.
  8. The hiring or discharge of an attesting CPA, or the compensation given thereto.
  9. The appointment or release of a financial, accounting, or internal auditing officer.
  10. Annual and semi-annual financial reports.
  11. Any other material matter so required by the company or the competent authority.
    The exercise of power by audit committee and independent directors and related matters shall be set forth in accordance with the Securities and Exchange Act, the Regulations Governing the Exercise of Powers by Audit Committees of Public Companies, and the rules and regulations of the TWSE or GTSM.
Article 28-1    A TWSE/GTSM listed company shall establish a remuneration committee. The professional qualifications for the committee members, the exercise of their powers of office, the adoption of the organizational charter, and related matters shall be handled pursuant to the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.
    The remuneration committee shall exercise the care of a good administrator in faithfully performing the official powers listed below, and shall submit its recommendations for deliberation by the board of directors. However, recommendations in connection with remuneration for supervisors may be submitted for deliberation by the board of directors only to the extent that the board of directors is authorized expressly by the company's articles of incorporation or by a resolution of the shareholders meeting to handle supervisor remuneration:
  1. Prescribe and periodically review the performance review and remuneration policy, system, standards, and structure for directors, supervisors and managerial officers.
  2. Periodically evaluate and prescribe the remuneration of directors, supervisors, and managerial officers.
    When performing the official powers of the preceding paragraph, the remuneration committee shall follow the principles listed below:
  1. With respect to the performance assessment and remuneration of directors, supervisors and managerial personnel of the company, it shall refer to the typical pay levels adopted by peer companies, and take into consideration the reasonableness of the correlation between remuneration and individual performance, the company's business performance, and future risk exposure.
  2. It shall not produce an incentive for the directors or managerial officers to engage in activity to pursue remuneration exceeding the risks that the company may tolerate.
  3. It shall take into consideration the characteristics of the industry and the nature of the company's business when determining the ratio of bonus payout based on the short-term performance of its directors and senior management and the time for payment of the variable part of remuneration.

Article 29    A TWSE/GTSM listed company shall select a professional, responsible and independent CPA to be its external auditor, who shall perform regular reviews of the financial conditions and internal control measures of the company. With regard to the irregularity or deficiency timely discovered and disclosed by the auditor during the review, and the concrete measures for improvement or prevention suggested by the auditor, the company shall faithfully implement improvement actions.
    A TWSE/GTSM listed company shall evaluate the independence of the CPA engaged by the company regularly and no less frequently than once annually. In the event that the company engages the same CPA without replacement for 7 years consecutively, or if the CPA is subject to disciplinary actions or other circumstances prejudicial to the independence of the CPA, the company shall review the necessity of replacing the CPA, and shall submit to the board the conclusion of such review.
Article 30    It is advisable that a TWSE/GTSM listed company engage a professional and competent legal counsel to provide adequate legal consultation services to the company, or to assist the directors, the supervisors and the management to improve their knowledge of the law, for the purposes of preventing any infraction by the company or its staff of laws or regulations, and ensuring the corporate governance matters will proceed pursuant to the relevant legal framework and the prescribed procedures.
    In the event that the directors, supervisors or the management are involved in litigation as result of performing his or her duties as provided by the law or arising from shareholders disputes, depending on the circumstances the company shall retain a legal counsel to provide assistance.
    Audit committee or an independent director may retain the service of legal counsel, CPA or other professionals on behalf of the company to conduct the necessary audit or provide consultation on matters in relation to the exercise of their power, at the expense of the company.
      Section 4 Rules for the Proceedings of Board Meetings and the Decision-Making Procedures
Article 31    The board of directors of a TWSE/GTSM listed company shall meet at least once every quarter, or convene at any time in case of emergency. To convene a board meeting, a meeting notice which specifies the purposes of meeting shall be sent to each director and supervisor no later than 7 days before the scheduled date. Sufficient meeting material shall also be prepared and enclosed in the meeting notice. If the meeting material is deemed inadequate, a director may ask the unit in-charge to provide more information or request a postponement of the meeting with the consent of the board of directors.
    A TWSE/GTSM listed company shall adopt the rules of proceedings for board meetings and follow the provisions in the Regulations Governing Procedure for Board of Directors Meetings of Public Companies with regard to the content of deliberations, procedures, matters to be recorded in the meeting minutes, public announcement, and other matters for compliance.
Article 32    A director shall exercise a high degree of self-discipline and shall voluntarily recuse from participating in discussion and voting, for himself or herself or as proxy for another director, on a proposal submitted to the board of directors that risks the involvement of the director's own interest to the detriment of the interest of the company. The directors shall practice self-discipline as to their internal relationship and must not support each other in an inappropriate manner.
    The matters that a director shall voluntarily recuse from voting shall be clearly set forth in the rules for the proceedings of board meetings.
Article 33    If a TWSE/GTSM listed company has independent directors, the independent directors must attend a board meeting in person without being represented by a non-independent director via proxy when the meeting is convened for considering any of the matters submitted to the board pursuant to Article 14-3 of the Securities and Exchange Act. When an independent director has a dissenting or qualified opinion, it shall be noted in the minutes of the board of directors meeting; if the independent director cannot attend the board meeting in person to voice his or her dissenting or qualified opinion, he or she should provide a written opinion before the board meeting unless justifiable reasons exist for failure to so comply, and the opinion shall be noted in the minutes of the board of directors meeting.
    In any of the following circumstances, decisions made by the board of directors shall be noted in the meeting minutes, and in addition, announced and reported on a website designated by the competent authority within 2 days after the date of said board meeting:
  1. An independent director has a dissenting or qualified opinion which is on record or stated in a written statement; or
  2. The matter was not approved by the audit committee (if the company has set up an audit committee), but had the consent of more than two-thirds of all directors.
    During the proceeding of the board meetings, managers from the relevant departments who are not directors may, in view of the meeting agenda, sit in at the meetings, make report on the current business conditions of the company and respond to inquiries raised by the directors. Where necessary, CPA, legal counsel or other professionals may be invited to sit in at the meetings to assist the directors in understanding the conditions of the company for the purpose of adopting an appropriate resolution.
Article 34    Staff personnel of a TWSE/GTSM listed company attending board meetings shall collect and correctly record the meeting minutes in detail, and the summary, method of resolution, and voting results of all the proposals submitted to the board meeting in accordance with relevant regulations.
    The minutes of the board of directors meetings shall be signed by the chairman and secretary of the meeting and be sent to each director and supervisor within 20 days after the meeting. The director attendance records shall become a part of the meeting minutes, and be treated as important corporate records and be kept safe permanently during the life of the company.
    Meeting minutes may be produced, distributed and preserved by electronic means.
    A company shall record on audio or video tape the entire proceedings of a board of directors meeting, and preserve the recordings for at least 5 years, in electronic form or otherwise.
    If before the end of the preservation period referred to in the preceding paragraph a lawsuit arises with respect to a resolution of a board of directors meeting, the relevant audio or video recordings shall be preserved for a further period, in which case the preceding paragraph does not apply.
    Where a board of directors meeting is held via teleconference or video conference, the audio or video recordings of the meeting form a part of the meeting minutes and shall be preserved permanently.
    Where a resolution of the board of directors violates laws, regulations, articles of incorporation, or resolutions adopted in the shareholders meeting, and thus causes an injury to the company, dissenting directors whose dissent can be proven by minutes or written statements will not be liable for damages.
Article 35    A TWSE/GTSM listed company shall submit the following matters to its board of directors for discussion:
  1. Corporate business plan.
  2. Annual and semi-annual financial reports.
  3. Adoption or amendment to an internal control system pursuant to Article 14-1 of the Securities and Exchange Act.
  4. Adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, to the handling procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, and endorsements or guarantees for others.
  5. The offering, issuance, or private placement of any equity-type securities.
  6. The performance assessment and the standard of remuneration of the managerial officers.
  7. The structure and system of director's remuneration.
  8. The appointment or discharge of a financial, accounting, or internal audit officer.
  9. Any matter required by Article 14-3 of the Securities and Exchange Act or any other law, regulation, or bylaw to be approved by resolution at a shareholders meeting or to be submitted to a meeting of the board of directors, or any such significant matter as may be prescribed by the competent authority.
    A TWSE/GTSM listed company shall submit the minutes of the seminars regarding the problems and review of the internal control system to the board of directors and make a report to the same.    Except for matters that must be submitted to the board of directors for discussion as provided in paragraph 1, the board of directors may delegate others to exercise its power when it is in recess according to laws or regulations, or its articles of incorporation. The delegation however shall be specific with regard to the level, content or matters of authorization, and general authorization is not permitted.
Article 36    A TWSE/GTSM listed company shall ask the appropriate corporate department or personnel to handle matters and implement actions pursuant to the board of directors resolutions in a way consistent with the program schedule and objectives. It shall also follow up on these matters and faithfully review their implementation.
    The board of directors shall ensure full control of the implementation and progress of these matters and make a report in subsequent meetings so as to ensure that the board's management decisions are faithfully implemented.
      Section 5 Fiduciary Duty, Duty of Care and Responsibility of Directors
Article 37    Members of the board of directors shall conduct corporate affairs with loyalty and perform this duty of care as a good administrator. In conducting the affairs of the company, they shall exercise their power with a high level of self-discipline and prudential attitude. Unless matters are otherwise reserved for approvals in shareholders meetings by law or in the articles of incorporation of the company, they shall ensure that all matters be handled according to the resolutions of board of directors.
    Where resolutions of the board of directors involve business development of the company and significant policy direction, the board or directors shall make careful consideration and may not affect the implementation and effectiveness of corporate governance.
    Independent directors shall perform their duties in accordance with relevant laws, regulations and the company's articles of incorporation so as to protect the interest of the company and shareholders.
    It is advisable for a TWSE/GTSM listed company to conduct yearly performance assessment of the board of directors, functional committees and each director by self-assessment, peer-to-peer assessment, engagement of outside professional institution or other appropriate way.
Article 37-1    It is advisable for a TWSE/GTSM listed company to establish a succession plan for the management. The development and implementation of such plan shall be periodically evaluated by the board of directors to ensure the sustainable operation.
Article 38    If a resolution of the board of directors violates law, regulations or the company's articles of incorporation, at the request of shareholders holding shares continuously for a year or an independent director, or at the notice of a supervisor to discontinue the implementation of the resolution, members of the board shall take appropriate measures or discontinue the implementation of such resolution as soon as possible.
    Upon discovering any threat of the company suffering material injury, members of the board of directors shall immediately report to the audit committee, an independent director member of the audit committee, or a supervisor in accordance with the foregoing paragraph.
Article 39    According to the articles of incorporation or resolution adopted in the shareholders meeting, a TWSE/GTSM listed company may take out liability insurance for directors with respect to their liabilities resulting from exercising their duties during their terms of occupancy so as to reduce and spread the risk of material harm to the company and shareholders arising from the wrongdoings or negligence of a director.
Article 40    Members of the board of directors are advised to participate in training courses on finance, risk management, business, commerce, accounting, law or corporate social responsibility offered by institutions designated in the Rules Governing Implementation of Continuing Education for Directors and Supervisors of TWSE/GTSM Listed Companies, which cover subjects relating to corporate governance upon becoming directors and throughout their terms of occupancy. They shall also ensure that company employees at all levels will enhance their professionalism and knowledge of the law.
   Chapter IV Empowering the Supervisors
      Section 1 Functions of Supervisors
Article 41    A TWSE/GTSM listed company shall stipulate a fair, just, and open procedure for the election of supervisors, and shall adopt the cumulative voting mechanism pursuant to the Company Act to fully reflect the opinions of the shareholders.
    A TWSE/GTSM listed company shall take into consideration the needs for overall business operation and comply with the rules of the TWSE or GTSM in setting the minimum number of supervisors.
    The aggregate shareholding percentage of all of the supervisors of a TWSE/GTSM listed company shall comply with the laws and regulations. Restrictions on the share transfer of each supervisor and the creation, release, or other changes of any pledges over the shares held by each supervisor shall comply with the relevant laws and regulations, and the relevant information shall be fully disclosed.
Article 42    A TWSE/GTSM listed company is advised to specify in its Articles of Incorporation that it adopts the candidate nomination system for elections of supervisors pursuant to the Company Act, and to review in advance the qualifications, education, working experience, background and the existence of any other matters set forth in Article 30 of the Company Act with respect to the supervisor candidates recommended by the shareholders or directors, and to provide the results of the review to the shareholders for their reference, so that qualified supervisors will be elected.
Article 43    Unless it is otherwise approved by the competent authority, at least one seat of supervisor shall not have a spousal relationship or a familial relationship within the second degree of kinship with another supervisor or a director.
    A TWSE/GTSM listed company is advised to refer to the provisions on independence as provided in the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies to appoint a suitable supervisor so as to enhance the risk management, and financial and operational control of the company.
    An supervisor preferably has a domicile within the territory of R.O.C. in order to timely perform the supervisory functions.
      Section 2 Powers and Obligations of Supervisors
Article 44    A supervisor shall be familiar with the relevant laws and regulations, understand the rights, obligations, and duties of directors of the company and the functions, duties, and operation of each department, and attend meetings of the board of directors to supervise the operations and to state his/her opinions when appropriate so as to control or discover any abnormal situation early on.
    A TWSE/GTSM listed company shall stipulate the supervisor's remuneration in its articles of incorporation or by an approval in a shareholders meeting.
Article 45    A supervisor shall supervise the implementation of the operations of the company, and the performance of duties by directors and managers, and care the enforcement of the internal control system so as to reduce the financial and operational risks of the company.
    Where a director, for himself/herself or on behalf of others, enters into a sale/purchase or loan transaction, or conducts any legal act with the company, a supervisor shall act as the representative of the company. In the event that the company has set up an audit committee, an independent director member of the audit committee shall act as the representative of the company in the above situation.
Article 46    A supervisor shall investigate the operational and financial conditions of the company from time to time, and the relevant departments in the company shall provide the books or documents that will be needed for the supervisor's review.
    When reviewing the finance or operations of the company, a supervisor may retain attorneys or CPAs on behalf of the company to perform the review; however, the company shall inform the relevant persons of their confidentiality obligations.
    The board of directors or managers shall submit reports in accordance with the request of the supervisors and shall not for any reason obstruct, circumvent, or refuse the inspection of the supervisor.
    When a supervisor performs his/her duties, a TWSE/GTSM listed company shall provide necessary assistance as needed by the supervisor, and the reasonable expenses that the supervisor needs shall be borne by the company.
Article 47    For supervisors to timely discover any possible irregular conduct in the company, a TWSE/GTSM listed company shall establish a channel for supervisors to communicate with the employees, shareholders, and stakeholders.
    Upon discovering any irregular conduct, a supervisor shall take appropriate measures timely to curb the expansion of the irregular conduct, and file a report to the relevant regulatory authorities or agencies if necessary.
    Where any of the independent directors, general managers, officers of finance, accounting, research & development, and internal audit department, or CPAs resigns or is removed from his/her position, the supervisors shall further investigate the reason thereof.
    In the event that a supervisor neglects his/her duties and therefore causes harm to the company, the supervisor shall be liable to the company.
Article 48    When exercising his/her supervisory power, each supervisor of a TWSE/GTSM listed company may, after taking into consideration the overall interest of the company and shareholders, convene a meeting to exchange opinions among all the supervisors when he or she feels necessary, but may not by such way obstruct supervisors in exercising their duties.
Article 49    According to the articles of incorporation or resolution adopted in a shareholders meeting, a TWSE/GTSM listed company may take out liability insurance for supervisors with respect to their liabilities resulting from exercising their duties during their terms of occupancy so as to reduce and spread the risk of material harm to the company and shareholders arising from the wrongdoings or negligence of a supervisor.
Article 50    Supervisors are advised to participate in training courses of finance, risk management, business, commerce, accounting, law or corporate social responsibility offered by institutions designated in the Rules Governing Implementation of Continuing Education for Directors and Supervisors of TWSE/GTSM Listed Companies, which cover subjects relating to corporate governance upon becoming supervisors and throughout their terms of occupancy.
   Chapter V Respecting Stakeholders' Rights
Article 51    A TWSE/GTSM listed company shall maintain channels of communication with its banks, other creditors, employees, consumers, suppliers, community or other stakeholders and shall respect and safeguard their legal rights.
    When a TWSE/GTSM listed company involves in a management buyout, it shall monitor the soundness of financial structure of the company thereafter.
    When any of a stakeholder's legal rights or interests is harmed upon, the company shall handle such matter in a proper manner and in good faith.
Article 52    A TWSE/GTSM listed company shall provide sufficient information to banks and its other creditors to facilitate their evaluation of the operational and financial conditions of the company and decision-making process. When any of their legal rights or interest is harmed upon, the company shall respond with a responsible attitude and assist creditors in obtaining compensation through proper means.
Article 53    A TWSE/GTSM listed company shall establish channels of communication with employees and encourage employees to communicate directly with the management, directors or supervisors so as to reflect employees' opinions about the management, financial conditions and material decisions of the company concerning employee welfare.
Article 54    In developing its normal business and maximizing the shareholders' interest, a TWSE/GTSM listed company shall pay attention to consumers' interest, environmental protection of community and public interest issues, and shall have high regard for the social responsibility of the company.
   Chapter VI Improving Information Transparency
      Section 1 Enhancing Information Disclosure
Article 55    Publication of information is the major responsibility of a TWSE/GTSM listed company. A TWSE/GTSM listed company shall perform its obligations faithfully in accordance with the relevant laws, and related TWSE and GTSM rules.
    A TWSE/GTSM listed company shall establish an internet-based reporting system for public information, appoint personnel responsible for gathering and disclosing the information, and establish a spokesperson system so as to ensure the proper and timely disclosure of information about policies that might affect the decisions of shareholders and stakeholders.
Article 56    In order to enhance the accuracy and timeliness of the material information disclosed, a TWSE/GTSM listed company shall appoint a spokesperson and acting spokesperson(s) who understand thoroughly the company's financial and business conditions and who are capable of coordinating among departments for gathering relevant information and representing the company in making statements independently.
    A TWSE/GTSM listed company shall appoint one or more acting spokesperson who shall represent the company, when the spokesperson cannot perform his/her duties, in making statements independently, provided that the order of authority is established to avoid any confusion.
    In order to implement the spokesperson system, a TWSE/GTSM listed company shall unify the process of making external statements and require the management and employees to maintain the confidentialities of financial and operational secrets and prohibit disclosure thereof by them at will.
    The company shall disclose the relevant information regarding any change to the position of a spokesperson or acting spokesperson upon such change.
Article 57    In order to keep shareholders and stakeholders fully informed, it is advisable that a TWSE/GTSM listed company utilizes the convenience of the Internet and set up a website containing the information regarding the company's finance, operation and corporate governance. It is also advisable to contain the corporate governance information in English as well.
    To avoid misleading information, the aforesaid website shall be maintained by specified personnel, and the recorded information shall be accurate, in detail and updated timely.
Article 58    A TWSE/GTSM listed company shall hold an institutional investor meeting in compliance with the regulations of the TWSE and GTSM, and it would be advisable to audio or video record the meeting. The financial and business information disclosed in the institutional investor meeting shall be disclosed on the designated internet information posting system and provided for inquiry through the website established by the company or other channels in accordance with the TWSE or GTSM rules.
      Section 2 Disclosure of Information on Corporate Governance
Article 59    A TWSE/GTSM listed company shall disclose the following information regarding corporate governance in the fiscal year in accordance with laws and regulations of the TWSE and GTSM.
  1. Corporate governance framework and rules.
  2. Ownership structure and the rights and interests of shareholders.
  3. Structure and independence of the board of directors.
  4. Responsibility of the board of directors and managerial officers.
  5. Composition, duties and independence of the audit committee or supervisors.
  6. Composition, duties and operation of the remuneration committee.
  7. The remuneration paid to the directors, supervisors, general manager and vice general manager in the most recent fiscal year, the analysis of the percentage of total remuneration to the net profit after tax, the policy, standard and package of remuneration payment, the procedure for determination of remuneration and the connection with the operation performance. Under a specifically special scenario, remuneration of the directors and supervisors shall be disclosed respectively.
  8. The progress of training of directors and supervisors.
  9. The rights of and relationships between the stakeholders.
  10. Details of the events subject to information disclosure required by law and regulations.
  11. The enforcement of corporate governance, differences between the corporate governance principles implemented by the company and these Principles, and the reason for the differences.
  12. Other information regarding corporate governance.
    A TWSE/GTSM listed company is advised, according to the actual performance of the corporate governance system, to disclose the plans and measures to improve its corporate governance system through appropriate mechanisms.
   Chapter VII Supplementary Provisions
Article 60    A TWSE/GTSM listed company shall at all times monitor domestic and international development of corporate governance and thereby review and improve the company's corporate governance mechanism so as to enhance the performance of corporate governance.