Newsletter
SHAREHOLDING REQUIREMENTS FOR PUBLIC COMPANY DIRECTORS AND SUPERVISORS
The Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies, issued by the Financial Supervisory Commission (FSC) pursuant to Article 26 of the Securities and Exchange Act, set out the minimum shareholding ratios for the directors and supervisors of a public company. Article 8 of the Rules previously provided that directors and supervisors could face an administrative fine if their total shareholdings in the company did not meet the statutory requirement, and the situation was not rectified within a given period.
According to Constitutional Interpretation No. 638, rendered by the Judicial Yuan on 7 March 2008, the above administrative penalty was not authorized by any law, and therefore was unconstitutional under Article 23 of the Constitution.
Based on the said Interpretation, the FSC amended the Rules on 20 May 2008. In addition to abolishing the administrative penalty, the FSC has made the following amendments:
‧Introduction of four new shareholding tiers
As the capitalization of companies listed on the Taiwan Stock Exchange (TSE) and on the OTC market has greatly increased in recent years, four additional tiers of shareholding ratios were introduced to avoid the difficulties directors and supervisors may have in meeting the shareholding requirements.
Company's paid-in capital | Minimum shareholding of all directors | Minimum shareholding of all supervisors | New tiers under the latest amendment |
NT$300 million or less | 15% | 1.5% | |
Over NT$300 million, but no more than NT$1 billion | 10% | 1% | |
Over NT$1 billion, but no more than NT$2 billion | 7.5% | 0.75% | |
Over NT$2 billion, but no more than NT$4 billion | 5% | 0.5% | |
Over NT$4 billion, but no more than NT$10 billion | 4% | 0.4% | |
Over NT$10 billion, but no more than NT$50 billion | 3% | 0.3% | ˇ |
Over NT$50 billion, but no more than NT$100 billion | 2% | 0.2% | ˇ |
Over NT$100 billion | 1% | 0.1% | ˇ |
‧Calculation of shareholdings of corporate shareholders
When the government or a corporate entity is a shareholder of a company, and it or its appointed representative is elected a director or supervisor, the total shareholding held by it or its appointed representative should be the number of registered shares held by the government or the corporate shareholder. But the registered shares held by the appointed representative may also be included if they are deposited in a segregated account with a centralized securities depository enterprise.
‧Abolishment of compliance deadline
Because administrative penalties for failure to meet the shareholding requirements have been abolished, it is no longer necessary to set a deadline for compliance. Therefore the one-month period for compliance is abolished.
Although the administrative penalties have been declared unconstitutional, the FSC believes that it is still necessary for directors and supervisors in Taiwan to observe certain minimum shareholding requirements. The FSC will strengthen its supervision through review of applications for TSE and OTC listing, and the imposition of disclosure obligations. For the former, if a TSE- or OTC-listed company wishes to increase its capital, or if an emerging-stock company wishes to be traded on the TSE or on the OTC market, whether its directors' and supervisors' shareholdings meet the requirements will be one of the major factors that decide whether the relevant application will be approved. For the latter, if directors' or supervisors' total shareholdings have been below the required levels for three consecutive months, such information will be disclosed on the Market Observation Post System (MOPS) website in order to alert investors to the situation.