Taiwan Stock Exchange Corporation, also known as Taiwan Stock Exchange（”TWSE”）, amended and promulgated “Guide to Regulations Governing Independent Directors” on August 28, 2020. The article consists of 4 parts: (1) Independent Director System and Related Matters, (2) Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reference on the Principles Regarding the Independent Directors of Listed Companies, (3) Guidelines for the Adoption of Codes of Ethical Conduct for TWSE/GTSM Listed Companies, (4) Essential Legal Knowledge to be Possessed by the Directors, and is amended on the basis of relevant laws and regulations.
Here are 6 things you need to know about the amendment:
- During the two years before the date of being elected by a shareholders’ meeting and during the term of office, an independent director of a public company and his or her relatives may not have any of the following connections with the public company:
- If a majority of the company’s director seats or voting shares and those of any other company are controlled by the same person: a director, supervisor, or employee of that other company.
- If the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses: a director (or governor), supervisor, or employee of that other company or institution.
- Non-application of certain restrictions with respect to concurrent service of independent directors in such capacity at a parent and its subsidiary or a subsidiary of the same parent Paragraph 2, Article 3 of the Regulations Governing Appointment of Independent Directors and Compliance Matter for Public Companies provides that Subparagraph 2 and Subparagraphs 5 to 7 of Paragraph 1, and Subparagraph 1, Paragraph 4, Article 3 of those Regulations do not apply to independent directors appointed in accordance with the Securities and Exchange Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
- No independent director of a public company may concurrently serve as an independent director of more than three other public companies. Where an independent director of a financial holding company or of a TWSE listed or TPEx listed investment holding company concurrently serves as an independent director of more than one wholly owned subsidiary of that company, the number of such subsidiaries beyond one shall be included in the calculation of the above-stated limit on the number of subsidiaries at which the independent director concurrently serves. (Paragraphs 1 and 2, Article 4 of the Regulations Governing Appointment of Independent Directors and Compliance Matter for Public Companies)
- If an independent director candidate included by a public company under the above provisions has already served as an independent director of the public company for three consecutive terms or more, the company shall publicly disclose, together with the results of the above-stated review, the reasons why the candidate is nominated again for the independent directorship, and present the reasons to the shareholders at the time of the election at the shareholders meeting. (Paragraph 6, Article 5 of the Regulations Governing Appointment of Independent Directors and Compliance Matter for Public Companies).
- TWSE/TPEx listed companies are required to stipulate the scope of duties of the independent directors and empower them with manpower and physical support related to the exercise of their power. The company may not impede, refuse, or evade the performance of duties by the independent directors. As the independent directors deem necessary to the performance of their duties, they may request the board of directors to appoint relevant personnel, or may at their own discretion hire professionals to provide assistance. The related expenses will be borne by the company. Under amended Article 178, administrative fines may be imposed for violations of the above provisions. These amendments strengthen the corporate government system and give independent directors a legal foundation to play a more vigorous role in corporate governance.
- TWSE and TPEx listed companies are advised to have in place, according to their size, business conditions, and management needs, qualified corporate governance personnel in an appropriate number and to appoint one chief corporate governance officer as the most senior executive for corporate governance affairs. A TWSE or TPEx listed company shall appoint a chief corporate governance officer if it has paid-in capital of NT$2 billion or more or if it is a financial or insurance enterprise that is so required by the competent authority. However, if its paid-in capital is less than NT$10 billion, it is allowed to complete the appointment of the chief corporate governance officer by June 30, 2021.
*For more details about “Guide to Regulations Governing Independent Directors”, please refer to http://www.selaw.com.tw/LawContent.aspx?LawID=G0104025
