The Taiwanese Congress (Legislative Yuan) passed an amendment to the Company Act on July 6, 2018. Around 150 articles in the Company Act have been amended. We, Brain Trust International Law firm, hereby brief the amendment for foreign companies and investors who are interested in this huge change.
1. According to the amendment of Section 2 of Article 4, it provides that all the foreign companies established under the foreign laws will have the same legal capacity enjoyed by the Taiwanese companies, subject to the restrictions per the Taiwanese laws. It means that all the foreign companies will no longer be required to file a request to the Taiwanese government for a certificate of recognition before operating business in the Taiwanese jurisdiction. However, under Article 371 of the Company Act, a foreign company still may not “transact business” in Taiwan absent completing the procedure for branch office registration. Offenders will be punished under the newly amended Section 2 of Article 371 for an imprisonment of no more than one year and/or a fine no more than NTD 150,000. Since in general the Taiwanese laws do not accept the corporate criminal liability theory, the natural persons other than the juridical person (companies) will be punished. In addition, Section 2 of Article 371 provides that the offenders will be subject to joint and several liability for any civil compensation. The Taiwanese government may further prohibit the offenders to use the name of the foreign company at issue. Moreover, before the amendment, the court has already held that people who represent themselves as employees of a foreign company in Taiwan for the purpose of signing an IP authorization contract shall be punished even if no cash with regard to the royalties as stated in the IP contract flows into Taiwan.
2. Section 4 of Article 9 provides that once the responsible persons, agents, employees or other officers in a company get a final and binding guilty judgment for the “offense of forgery” under Chapter 15 of the Taiwanese Criminal Code with regard to the company registration, the government may, ex officio or upon a request made by an interested party, cancel or nullify such registration of the said company. The “offense of forgery” under Chapter 15 of the Taiwanese Criminal Code is very broad, encompassing all the offenses like making or using fake documents, fake signatures or fake seals, making false statements to the public servant as a record, and making false statements when doing business operation. Before the amendment, the Taiwanese courts expressed different opinions with regard to the issue whether making false statements when doing business operation can result in the cancellation or nullification of the company registration. The Amendment solved such disputes. It means that the companies must ensure every document in connection with their business operation is true and correct in compliance with the laws.
3. Section 2 of Article 13 provides that, except for a company whose shares have been issued in public, a company may invest in other companies and such investment will not be subject to the 40% of its capital amount restriction. However, for a company whose shares have been issued in public, its investment in other companies still may not exceed 40% of its capital amount unless the said company specializes itself in investment, the company chapter provides otherwise, or the shareholder meeting passes a resolution with at least two-thirds shareholders present. Apparently, the amendment aims to loosen the 40% capital amount restriction to boost the Taiwanese economy.
4. Article 18 emphasizes that a company under Taiwanese laws must have a Chinese name, avoiding the dispute whether a company can only have an English name.
5. Before the amendment, only those companies whose equity capital exceeds an amount of NTD 30,000,000 would be required to have its financial statement audited and certified by an accountant. Now, under Section 2 of Article 20, even if the equity capital amount does not exceed NTD 30,000,000, the government may order that a company which has a “certain business scale” shall have its financial statement audited and certified by an accountant as well.
6. Article 22-1 provides that a company shall electronically file the designated information for its directors, supervisors, managers, and any shareholder who owns more than 10% shares of the said company to the government. The designated information includes names, titles, nationality, date of birth, ID number, and the number of shares or the capital paid. Article 22-1 aims to strengthen the Taiwanese recent policy against money laundering. However, since every company is required to electronically file such designated information, it is anticipated that most of the small companies in Taiwan will have huge costs for compliance issues.
We, Brain Trust International Law Firm, will continue to introduce the amendment by following articles.
Your Trust, Our Honor