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Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies(2020.02.13) |
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Article 3
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A TWSE/TPEx listed company shall follow the Criteria Governing Establishment of Internal Control Systems by Public Reporting Companies and take into consideration the overall operational activities of itself and its subsidiaries to design and fully implement an internal control system, and shall conduct continuing reviews of the system, in order to ensure the continued effectiveness of its design and implementation in light of changes in the company's internal and external environment.
A TWSE/TPEx listed company shall perform full self-assessments of its internal control system. Its board of directors and management shall review the results of the self-assessments by each department at least annually and the reports of the internal audit department on a quarterly basis. The audit committee or supervisors shall also attend to and supervise these matters. Directors and supervisors shall periodically hold discussions with their internal auditors about reviews of internal control system deficiencies. A record of the discussions shall be kept, and the discussions shall be followed up, improvements implemented, and a report submitted to the board of directors. TWSE/TPEx listed companies are advised to establish channels and mechanisms of communication between their independent directors, audit committees or supervisors, and chief internal auditors, and the convener of the audit committee or supervisors shall report the communications between members of the audit committees or supervisors and chief internal auditors at the shareholders' meeting.
The management of a TWSE/TPEx listed company shall pay special attention to the internal audit department and its personnel, fully empower them and urge them to conduct audits effectively, to evaluate problems of the internal control system and assess the efficiency of its operations to ensure that the system can operate effectively on an on-going basis, and to assist the board of directors and the management to perform their duties effectively so as to ensure a sound corporate governance system.
Appointment, dismissal, evaluation and review, salary and compensation of internal auditors of a TWSE/TPEx listed company shall be reported to the board of directors or shall be submitted by the chief auditor to the board chairperson for approval.
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Article 3-1
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(Personnel responsible for corporate governance affairs)
A TWSE/TPEx listed company is advised to have an adequate number of corporate governance personnel with appropriate qualifications based on the size of the company, business situations and management needs, and shall appoint in accordance with the requirements of the competent authorities, TWSE or TPEx a chief corporate governance officer as the most senior officer to be in charge of corporate governance affairs. Said officer shall be a qualified, practice-eligible lawyer or accountant or have been in a managerial position for at least three years in a securities, financial, or futures related institution or a public company in handling legal affairs, legal compliance, internal audit, financial affairs, stock affairs, or corporate governance affairs.
It is required that the corporate governance affairs mentioned in the preceding paragraph include at least the following items:
- Handling matters relating to board meetings and shareholders meetings according to laws
- Producing minutes of board meetings and shareholders meetings
- Assisting in onboarding and continuous development of directors and supervisors
- Furnishing information required for business execution by directors and supervisors
- Assisting directors and supervisors with legal compliance
- Other matters set out in the articles or corporation or contracts
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Article 7
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A TWSE/TPEx listed company shall encourage its shareholders to actively participate in corporate governance. It is advisable that the company engage a professional shareholder services agent to handle shareholders meeting matters, so that shareholders meetings can proceed on a legal, effective and secure basis. A TWSE/TPEx listed company shall seek all ways and means, including fully exploiting technologies for information disclosure, to upload annual reports, annual financial statements, notices, agendas and supplementary information of shareholders meetings in both Chinese and English concurrently, and shall adopt electronic voting, in order to enhance shareholders' attendance rates at shareholders meetings and ensure their exercise of rights at such meetings in accordance with laws.
A TWSE/TPEx listed company is advised to avoid raising extraordinary motions and amendments to original proposals at a shareholders meeting.
TWSE/TPEx listed companies are advised to arrange for their shareholders to vote on each separate proposal in the shareholders meeting agenda, and following conclusion of the meeting, to enter the voting results the same day, namely the numbers of votes cast for and against and the number of abstentions, on the Market Observation Post System.
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Article 10
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A TWSE/TPEx listed company shall place high importance on the shareholder right to know, and shall faithfully comply with applicable regulations regarding information disclosure in order to provide shareholders with regular and timely information on company financial conditions and operations, insider shareholdings, and corporate governance status through the MOPS or the website established by the company.
To treat all shareholders equally, it is advisable that the company concurrently disclose the information under the preceding paragraph in English.
To protect its shareholders' rights and interests and ensure their equal treatment, a TWSE/TPEx listed company shall adopt internal rules prohibiting company insiders from trading securities using information not disclosed to the market.
It is advisable that the rules mentioned in the preceding paragraph include stock trading control measures from the date insiders of a TWSE/TPEx listed company become aware of the contents of the company’s financial reports or relevant results.
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Article 22
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A TWSE/TPEx listed company shall specify in its articles of incorporation in accordance with the laws and regulations of the competent authorities that it adopts the candidate nomination system for elections of directors, carefully review the qualifications of a nominated candidate and the existence of any other matters set forth in Article 30 of the Company Act, and act in accordance with Article 192-1 of the Company Act.
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Article 23
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(The board of directors of a TWSE/TPEx company shall draw clear distinctions of the authorities and responsibilities of the functional committees, chairperson of the board and general manager)
Clear distinctions shall be drawn between the responsibilities and duties of the chairperson of the board of a TWSE/TPEx listed company and those of its general manager.
It is inappropriate for the chairperson to also act as the general manager or an equivalent post.
A TWSE/TPEx listed company with a functional committee shall clearly define the responsibilities and duties of the committee.
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Article 24
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(A TWSE/TPEx listed company shall appoint independent directors in accordance with its articles of incorporation)
A TWSE/TPEx listed company shall appoint independent directors in accordance with its articles of incorporation. They shall be 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. Applicable laws and regulations shall be observed and, in addition, it is not advisable for an independent director to hold office concurrently as a director (including independent director) or supervisor of more than five other TWSE/TPEx listed companies. Independent directors shall also maintain independence within the scope of their directorial duties, and may not have any direct or indirect interest in the company.
If a TWSE/TPEx 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/TPEx 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/TPEx 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/TPEx listed company, any foundation to which the TWSE/TPEx 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.
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 Taipei Exchange.
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Article 28-2
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(A TWSE/TPEx listed company is advised to establish a nomination committee)
A TWSE/TPEx listed company is advised to establish a nomination committee and its articles of association. It is advisable that a majority of the members of said committee be independent directors and an independent director be its chairperson
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Article 28-3
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(A whistleblowing system)
A TWSE/TPEx listed company is advised to establish and announce channels for internal and external whistleblowers and have whistleblower protection mechanisms in place. The unit that handles whistleblowers’ reporting shall be independent, provide encrypted protection for the files furnished by whistleblowers, and appropriately restrict access to such files. It shall also formulate internal procedures and incorporate those procedures into the company's internal control system for management purposes.
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Article 37
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(Members of the board of directors shall faithfully conduct corporate affairs and perform the duty of care of a good administrator)
Members of the board of directors shall faithfully conduct corporate affairs and perform the duty of care of a good administrator. In conducting the affairs of the company, they shall exercise their powers with a high level of self-discipline and prudence. Unless matters are otherwise reserved by law for approval in shareholders meetings or in the articles of incorporation, they shall ensure that all matters are handled according to the resolutions of board of directors.
It is advisable that a TWSE/TPEx listed company formulate rules and procedures for board of directors performance assessments. Each year, in respect of the board of directors and individual directors, it shall conduct regularly scheduled performance assessments through self-assessments or peer-to-peer assessments, and may also do so through outside professional institutions or in any other appropriate manner. A performance assessment of the board of directors shall include the following aspects, and appropriate assessment indicators shall be developed in consideration of the company's needs:
- The degree of participation in the company's operations.
- Improvement in the quality of decision making by the board of directors.
- The composition and structure of the board of directors.
- The election of the directors and their continuing professional education.
- Internal controls.
The performance assessments of board members (self-assessments or peer-to-peer assessments) shall include the following aspects, with appropriate adjustments made on the basis of the company's needs:
- Their grasp of the company's goals and missions.
- Their recognition of director's duties.
- Their degree of participation in the company's operations.
- Their management of internal relationships and communication.
- Their professionalism and continuing professional education.
- Internal controls.
It is advisable that a TWSE/TPEx company conduct performance assessments of a functional committee, covering the following aspects, with appropriate adjustments made on the basis of the company's needs:
- Their degree of participation in the company's operations.
- Their recognition of the duties of the functional committee.
- Improvement in the quality of decision making by the functional committee.
- The composition of the functional committee, and election and appointment of committee members.
- Internal control.
A TWSE/TPEx listed company is advised to submit the results of performance assessments to the board of directors and use them as reference in determining compensation for individual directors, their nomination and additional office term.
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Article 37-2
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(Establishment of an intellectual property regulatory system)
The board of directors is advised to evaluate and monitor the following aspects of a TWSE/TPEx company’s direction of operation and performance in connection with intellectual properties, to ensure the company develops an intellectual property regulatory system in accordance with the Plan-Do-Check-Act cycle:
- Formulate intellectual property regulatory policies, objectives and systems that are slightly associated with the operational strategies.
- Develop, implement and maintain on the basis of scale and form its regulatory systems governing the procurement, protection, maintenance and utilization of intellectual properties.
- Identify and provide the necessary resources sufficient to ensure effective implementation and maintenance of the intellectual property regulatory system.
- Observe internally and externally the risks and opportunities that intellectual property regulation may present and adopt corresponding measures.
- Plan for and implement a continuous improvement mechanism to ensure the operation and effects of the intellectual property regulatory regime meet the company’s expectations.
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Article 42
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(Specification in the articles of incorporation the adoption of the candidate nomination system for elections of supervisors)
A TWSE/TPEx listed company shall specify in its articles of incorporation in accordance with the laws and regulations of the competent authorities that it adopts the candidate nomination system for elections of supervisors, carefully review the qualifications of a nominated candidate and the existence of any other matters set forth in Article 30 of the Company Act, and act in accordance with Article 192-1 of the Company Act.
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