Taiwan, located in East Asia, has one of the largest and most stable economies outside of the United Nations (UN) countries. The island's rapid growth and success has been dubbed the 'Taiwan Miracle'. In order to continue this impressive growth, the government has enhanced corporate governance in recent years and has sought to ease restrictions on foreign companies operating in the territory.
In July 2018, Taiwan's government enacted a total of 148 amendments to the Company Act, with the prescribed changes effective from 1 November 2018. The amendments have been carefully designed to provide flexibility in a number of important areas, including company set-up and corporate governance.
The Taiwanese government recently issued several rulings for clarification in the first quarter of 2019 to help companies fully understand the changes, which have helped to reduce often unnecessary corporate formalities.
Below is a summary of the key amendments that are relevant for a foreign company with its own Taiwanese subsidiary. In order to apply these amendments, companies now need to make necessary revisions to their articles of incorporation.
Dividend distribution options
The distribution of dividends was previously annually only, but it's now possible to do it quarterly or bi-annually. Companies must add this provision into their articles of incorporation in order to do so. The board can resolve such quarterly and biannual dividends after proper reservations for tax estimates, employee compensation estimates, legal reserves and coverage for losses (as per Article 228-1).
Board meeting notice
The notice for a board of directors meeting has now been shortened from seven days to three days. To call such a meeting, appropriate notice must be given to each director and supervisor at least three days ahead of the proposed meeting date.
Companies must provide this update in their articles of incorporation in order to make this change effective. If a longer period of notice is required by a company's articles of incorporation, then such a longer period shall prevail. This is not applicable to publicly-listed companies.
Company name in a foreign language
In addition to its Chinese name, a Taiwanese company can now also register an English name, so long as the English name is provided in its articles of incorporation.
Please note that the authorities can ask a company to amend its English name if it is already being used by another company registered with the Bureau of Foreign Trade. Any company that conducts imports and exports is required to register their English name with the Bureau of Foreign Trade (as per Article 392-1).
Companies limited by shares
The minimum requirement for the board of a sole shareholder company is usually one director and one supervisor. When a company only has one director, that director shall be the chairman. The requirement for a supervisor can now be exempted through a company's articles of incorporation (as per article 128-1).
Corporate meetings have also been simplified. In addition to face-to-face meetings, shareholder meetings can now be held by video conference, if this is provided for it the company's articles of incorporation. The shareholders who participate by video conference will be deemed to have attended the meeting in person. This is not applicable to publicly-listed companies (Article 172-2).
You can view the full Company Act online for further details of all provisions.
TMF Group in Taiwan
The latest raft of amendments to the Company Act are a core part of a company's corporate governance whilst operating in Taiwan.
TMF Taiwan has wide-ranging expertise in accounting, corporate secretarial services, tax, HR and payroll. We can provide a comprehensive range of corporate services to help you reduce risks, be compliant, control costs and simplify your operations.
Through our local expertise, we can help you to be fully up-to-date with all the latest regulation in Taiwan. Get in touch today to discuss your needs in detail.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.