June 2018
The re-election of all directors and supervisors does not require a special resolution in advance to remove all directors and supervisors (Taiwan)
2018.3.13
Grace Chiang
The Taiwan High Court rendered the 105-Shang-963 Civil Decision of March 13, 2018 (hereinafter, the "Decision"), holding that since "re-electing" all directors and supervisors has different implications from "removing" directors and supervisors, it is certainly not necessary to adopt a special resolution to remove all directors and supervisors before the re-election.
The Plaintiff in this Decision was a shareholder of Company B, which is the Defendant. When the Plaintiff attended Company B's shareholders' meeting (hereinafter, the "Shareholders' Meeting at Issue"), the shareholders were not requested to take a vote on whether to re-elect all directors and shareholders of Company B before the re-election resolution. The Plaintiff thus claimed that the resolution of the Shareholders' Meeting at issue has violated the legislative purpose of Article 199-1 of the Company Law, and requested for a cancellation of the resolution of the Shareholders' Meeting at issue in accordance with Article 189 of the Company Law. Since the original decision had been rendered against the Plaintiff’s request, the Plaintiff appealed.
According to the Decision, the legislative purpose of Article 199-1 of the Company Law seeks to clarify issues concerning the tenure of new and old directors when directors are re-elected during a shareholders' meeting before their tenures expire; not to stipulate how directors shall be elected or removed, neither to stress that a special resolution is required for an early re-election or that a resolution to remove all directors shall be adopted before the resolution to re-elect all directors. In addition, since "the deemed early removal" is stipulated under Article 199-1 of the Company Law, a prior resolution to remove all directors is certainly not a prerequisite for re-electing directors, and the nature of such removal is certainly a type of ipso facto removal under the law, not removal by resolution. Otherwise, it would be unnecessary to specifically stipulate "the deemed early removal." Therefore, since "re-electing" all directors and supervisors has different implications from "removing" directors and supervisors, it is certainly not necessary to remove all directors and supervisors through a special resolution in advance. Such re-election may be conducted in the same manner as the election of all directors and supervisors, namely, with the attendance of shareholders holding the majority of total outstanding shares under Article 174 of the Company Law, and through election via the cumulative voting method under Article 198 of the same law.
Therefore, this Decision held that the Plaintiff's claim, which was the Shareholders' Meeting at Issue had violated Article 199-1 of the Company Law for failing to vote whether to re-elect all directors and supervisors before the re-election, was groundless. Accordingly, the Plaintiff's appeal was dismissed and the original decision was upheld.
Grace Chiang
The Taiwan High Court rendered the 105-Shang-963 Civil Decision of March 13, 2018 (hereinafter, the "Decision"), holding that since "re-electing" all directors and supervisors has different implications from "removing" directors and supervisors, it is certainly not necessary to adopt a special resolution to remove all directors and supervisors before the re-election.
The Plaintiff in this Decision was a shareholder of Company B, which is the Defendant. When the Plaintiff attended Company B's shareholders' meeting (hereinafter, the "Shareholders' Meeting at Issue"), the shareholders were not requested to take a vote on whether to re-elect all directors and shareholders of Company B before the re-election resolution. The Plaintiff thus claimed that the resolution of the Shareholders' Meeting at issue has violated the legislative purpose of Article 199-1 of the Company Law, and requested for a cancellation of the resolution of the Shareholders' Meeting at issue in accordance with Article 189 of the Company Law. Since the original decision had been rendered against the Plaintiff’s request, the Plaintiff appealed.
According to the Decision, the legislative purpose of Article 199-1 of the Company Law seeks to clarify issues concerning the tenure of new and old directors when directors are re-elected during a shareholders' meeting before their tenures expire; not to stipulate how directors shall be elected or removed, neither to stress that a special resolution is required for an early re-election or that a resolution to remove all directors shall be adopted before the resolution to re-elect all directors. In addition, since "the deemed early removal" is stipulated under Article 199-1 of the Company Law, a prior resolution to remove all directors is certainly not a prerequisite for re-electing directors, and the nature of such removal is certainly a type of ipso facto removal under the law, not removal by resolution. Otherwise, it would be unnecessary to specifically stipulate "the deemed early removal." Therefore, since "re-electing" all directors and supervisors has different implications from "removing" directors and supervisors, it is certainly not necessary to remove all directors and supervisors through a special resolution in advance. Such re-election may be conducted in the same manner as the election of all directors and supervisors, namely, with the attendance of shareholders holding the majority of total outstanding shares under Article 174 of the Company Law, and through election via the cumulative voting method under Article 198 of the same law.
Therefore, this Decision held that the Plaintiff's claim, which was the Shareholders' Meeting at Issue had violated Article 199-1 of the Company Law for failing to vote whether to re-elect all directors and supervisors before the re-election, was groundless. Accordingly, the Plaintiff's appeal was dismissed and the original decision was upheld.
