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Regarding the legitimacy of putting forward a proposal to change the method to elect directors and supervisors from cumulative voting to block voting and electing new directors and supervisors according to the newly revised articles of incorporation at a shareholders' meeting on the same day, the Supreme Court rendered a noteworthy judgment in May 2009.
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According to the Company Act, not all proposals floated in a meeting can be characterized as an extemporary motion. Instead, only when there is no other specific item/process in the agenda of the meeting to be proposed or discussed can a matter being proposed through the Extemporary Motion Process be called an "Extemporary Motion." If there are specific items (processes) to be proposed and discussed in the agenda, those items are not extemporary motions as defined under the Company Act. Therefore, the purposes or subjects of a shareholders' meeting serve only to clarify the main contents and agenda of the meeting, such as the issues to be discussed and their purposes. To write merely "electing directors and supervisors," "revising the articles of incorporation," "dissolution, merger or split-up of the company" in the agenda attached in the meeting notice to shareholders is adequate, and the exact contents of the proposal do not need to be given. Furthermore, the agenda item concerning the revision of the articles of incorporation shall be "specified" in the purposes or subjects of the shareholders' meeting, which are stated in the meeting notice, and this item cannot be proposed through an extemporary motion. Thus, if the shareholders' meeting is for the purpose of modifying the articles of incorporation, such purpose shall be given, excluding exact articles to be revised, in the "purpose of the meeting" in the notice to convene a shareholders' meeting, and the purpose of modifying the articles of incorporation is not allowed to be proposed by way of extemporary motion. |
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According to the Guidelines for the Manual for Shareholders' Meeting, the agenda proposed by the convener of a regular shareholders' meeting shall be stated in the manual for a shareholder's meeting. Since the regular shareholders' meeting is convened by the board of directors, the contents of the meeting notice and information to be disclosed in the manual for shareholders' meeting will be the matters proposed by the board of directors, i.e., the convener of the shareholders' meeting. If a revision is proposed by shareholders at a shareholders' meeting and not the proposal of the board of directors, it is not required to be stated in the manual of shareholders' meeting. If the company has already disclosed the revision of the articles of incorporation in the meeting agenda, the procedure to convene a meeting is not in violation of the Company Act or the manual for shareholders' meeting.
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Since shareholders have the right to make proposals at a regular shareholders' meeting, they shall also have the right to submit a proposal to revise the agenda the board of directors prepared in advance. If a shareholder, in the course of a shareholders' meeting, proposes to amend the articles of incorporation on the basis of an existing proposal on the agenda, such proposal is only a revision of an existing proposal on the agenda and cannot be deemed as an extemporary motion.
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Whether a shareholder is allowed to propose revision of the articles of incorporation to change the cumulative voting method before the election of directors and supervisors through the resolution at a shareholders' meeting shall be an issue to be determined at the company's sole discretion. In addition, adopting the block voting method in the election of directors and supervisors is also permitted by the laws and regulations. Therefore, even if adopting the block voting method to elect directors and supervisors is questioned for violating the principle of proportionality against shareholders, it is still allowed under the existing law and we can only expect the future law to settle this issue. Under the existing law, claiming abuse of right on the grounds that the articles of incorporation had been legitimately amended at a shareholder's meeting to adopt the block voting method is not accepted.
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The articles of incorporation are required to be registered for claims against a third party but not for it to be valid. Thus, once the articles of incorporation are amended, the amendment shall take effect immediately. The Company Act stipulates that the distribution of surplus earnings shall be effected once every year. If a company has surplus earnings by the end of a fiscal year, directors shall prepare a proposal for distribution of surplus earrings in accordance with the articles of incorporation and carry out the procedures required by the Company Act in order to protect shareholders' rights. The proposal for distribution of surplus earrings should be based on the "financial statements of the previous year," and the surplus earnings can be distributed only when the losses of the company have been made up and a legal reserve has been set aside. The proposal shall be made in accordance with "the articles of incorporation valid when the proposal is made," and the surplus earnings can be distributed to shareholders only when the board of directors proposal to distribute surplus earrings being recognized at a shareholders' meeting. On the contrary, it is unnecessary for the election of directors and supervisors to be conducted based on any requirements of the previous fiscal year or to follow any prerequisite measures; therefore, the election of directors and supervisors shall be made in accordance with the newly modified and effective electoral method immediately to reflect the shareholders' real-time opinions.
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