Newsletter
CHAIRPERSON MAY BE ELECTED BEFORE DEMERGER RECORD DATE
A company demerger becomes legally effective on the demerger record date. But in order to simplify demerger procedures, the Corporate Mergers and Acquisitions Law specifically pro-vides that if the demerged business operations will be taken over by a newly incorporated company, then the shareholders' meeting of the demerged company that approves the demerger plan should be regarded as the promoters' meet-ing of the new company. As such it can elect the directors and supervisors of the new company, and there is no need to wait until after the demerger record date to carry out the elections.
If the new company is to be a single-shareholder company, the above provision cannot apply be-cause a single-shareholder company does not require a promoters' meeting. However, ac-cording to an interpretation issued by the Minis-try of Economic Affairs (MOEA) on 30 August 2002, the directors and supervisors of the new company may still be designated during the pe-riod between the shareholders’ meeting that ap-proves the demerger plan and the demerger re-cord date.
Although the directors and supervisors of a newly incorporated company may be elected or designated before the demerger record date, there has still been doubt in practice as to whether the directors may hold a board meeting to elect a chairperson before the demerger record date. Based on the legislative intent of simpli-fying mergers and acquisitions procedures, and in order to allow new companies to begin their operations smoothly, on 25 June 2003 the MOEA issued a further interpretation stating that it is permissible for the directors of a newly in-corporated company to hold a board meeting to elect a chairperson before the demerger record date, and for the chairperson to assume office on the demerger record date.