AGMs go digital in Taiwan
As its economy thrives, Taiwan is pressing ahead with its digitalisation efforts. One new initiative is the amendments to the Company Act to allow public companies to hold shareholder meetings virtually, enhancing flexibility and minimising disruption amid any future force majeure events.
Last year, the Taiwanese economy, dubbed the ‘Taiwan Miracle’ due to its rapid growth and success, grew at its fastest pace for more than a decade.
As a major hub in the global technology supply chain for companies such as Apple, Taiwan’s economy has outperformed many of its regional peers during the pandemic. Gross domestic product (GDP) growth hit 6.28% in 2021, compared to 3.11% in 2020.
This impressive growth was driven by recovering consumer confidence and a robust appetite for tech exports amid a global shortage of semiconductors and rising demand for products to support people working and studying from home.
Taiwan’s thriving IT industry, increased openness to foreign investment and foreign-owned companies, and digitalisation efforts have combined to boost its attractiveness to investors and business leaders alike.
In order to keep up its growth trajectory, the Taiwanese government has improved corporate governance and sought to ease restrictions on companies operating in the territory. In TMF Group’s 2021 Global Business Complexity Index, we saw signs that Taiwan is becoming an easier place in which to do business, with its ranking moving down to 32nd place from 16th the previous year.
An online option for shareholder meetings
One such initiative is the amendments to the Company Act regarding video conference provisions, making it easier to conduct important meetings virtually.
In December 2021, the Legislative Yuan completed the third reading on draft amendments of Articles 172-2 and 356-8 in the Company Act, submitted by the Executive Yuan. Public companies, as well as non-public companies, can now hold their shareholder meetings via visual communication networks (video conference facilities), so long as they explicitly provide for such in their Articles of Incorporation.
These changes have been prompted by the Covid-19 pandemic. Previously, many companies were restricted to physical AGMs, but as the situation in Taiwan worsened in early 2021 and social distancing came into force, this became impossible.
In Taiwan, May to June is the peak season for AGMs, especially for public companies, and the restriction on physical AGMs impacted shareholders’ interests. For the first time, the Ministry of Economic Affairs (MOEA) and the Financial Supervisory Commission, R.O.C. last year announced that companies could postpone until August 2021.
At the same time, the MOEA also began thinking about how this type of situation (pandemics, natural disasters, and other force majeure events) could happen again, and how a longer-term solution is necessary.
As technology, which of course underpins Taiwan’s economy, continues to advance, it’s becoming more common for shareholders around the world to participate in meetings and exercise their shareholder rights over video conference. Such provisions therefore deserve more attention and further protection, and so the amendments to the Company Act were introduced.
What are the risks of non-compliance?
In the event of further pandemics, or other force majeure events, if a company’s Articles of Incorporation haven’t been revised, then shareholders will be unable to participate virtually.
This in turn has adverse effects on the operations of the company and shareholder equity. The amendments to the Company Act have been designed to allow public companies to adopt video conferencing for shareholder meetings, with the sub-laws established by the competent authority applied as a priority.
Public companies and certain specially-regulated companies now need to incorporate these amendments to the Company Act into their Articles of Incorporation, and get them approved by the competent authority before they convene an AGM or other shareholder meeting by video conference.
As well as ensuring that business can continue amid events such as Covid-19, the amendments unlock a number of benefits for public companies. These include cost and time savings by switching shareholder meetings from a physical venue to online.
But if they fail to comply, the director who represents the company can be fined. For a public company, the responsible person shall receive a fine from the competent authority in charge of securities affairs of no less than NT$240,000 but not more than NT$2,400,000, in accordance with the Company Act.
How can TMF Group help?
Since 2009, TMF Group has offered its clients operating in Taiwan an expert team of specialists in accounting, tax, entity management, corporate secretarial services, HR and payroll.
Our team works with clients both locally and internationally, providing a full range of corporate support to help you reduce risk, maintain compliance, control costs and simplify operations.
We can help you to amend your Articles of Incorporation and file the change application with the competent government registry. We can also further support you with preparing AGM minutes.
Talk to us today to find out more.
