August 2022
Explanations for the Chairman’s Inability to Exercise Authority (Taiwan)
August 2022
Teresa Huang and Julian Lai
Article 43, Paragraph 1 of the Foundation Act stipulates that “the chairman internally presides the board meeting and externally represents the public-endowed foundation. If the chairman is on leave or cannot exercise his or her authority for legal or other reasons, the vice-chairman shall take his or her place; if there is no vice-chairman, he or she is on leave, or cannot exercise his or her authority for legal or other reasons, the chairman shall appoint a board member as a substitute; if the chairman cannot or has not appointed a substitute, the directors shall elect a substitute from among themselves[1].” How exactly the phrase “the chairman cannot exercise his or her authority for legal or other reasons” is interpreted or applied affects whether others may legally exercise the chairman’s authority as a substitute. The 110-Tai-Shang-3224 Civil Decision rendered by the Supreme Court disagreed with the lower courts on this issue. The courts’ respective opinions are worth examining and comparing. Below are summaries of the case and the respective court opinions.
1. Facts of the case
Chairman De-Mei Zhong of the Chang Yung-Fa Charity Foundation convened the board meeting on April 17th of 2020. Originally, the director re-election proposal was listed as the 10th item, but board member Guo-Zheng Chang proposed to move the re-election to item 1. Chairman Zhong thus dismissed the board meeting and left together with five other board members, while 9 other members remained. According to Article 43, Paragraph 1 of the Foundation Act, a simple majority of the present board members, i.e. 8 directors, elected Guo-Zheng Chang as moderator and continued the meeting, during which they dismissed Zhong as chairman and instead elected board member Jing-Ming Wu as the new chairman.
2. The opinion of the Taiwan High Court
The Taiwan High Court ruled that once chairman De-Mei Zhong convened and then left the board meeting, she, in fact, could not exercise her authority as chairman for the meeting. Since the Chang Yung-Fa Charity Foundation has no vice-chairman and chairman Zhong did not appoint a substitute, the present board members elected Guo-Zheng Chang as a temporary moderator according to Article 43, Paragraph 1 of the Foundation Act and continued the meeting, resulting in the dismissal of Zhong and the election of Jing-Ming Wu as the new chairman. The court ruled that the process is legally legitimate.
3. The opinion of the Supreme Court
The Supreme Court ruled that the phrase “the chairman cannot exercise his or her authority for legal or other reasons” refers to either incapable (such as if the chairman were detained) or legally prohibited (such as a temporary injunction on the exercise of the authority of the chairman), and does not include cases where the chairman can but passively refuses to exercise his or her authority. In this case, since board member Guo-Zheng Chang’s proposal of changing the meeting agenda did not include threatening or frightening speech and may not cause disorder interrupting the meeting, chairman Zhong dismissed the meeting and left the premises, refusing to moderate the meeting, which may be considered as that she was still capable of exercising her authority but passively declined to. Therefore, there is still doubt on whether chairman Zhong factually cannot exercise her authority, so the Supreme Court repealed and remanded the case.
The final ruling on whether Chang Yung-Fa Charity Foundation’s chairman dismissal and election procedure was flawed may affect the legality of relevant board resolutions under the new chairman, making the case worth following.
Teresa Huang and Julian Lai
Article 43, Paragraph 1 of the Foundation Act stipulates that “the chairman internally presides the board meeting and externally represents the public-endowed foundation. If the chairman is on leave or cannot exercise his or her authority for legal or other reasons, the vice-chairman shall take his or her place; if there is no vice-chairman, he or she is on leave, or cannot exercise his or her authority for legal or other reasons, the chairman shall appoint a board member as a substitute; if the chairman cannot or has not appointed a substitute, the directors shall elect a substitute from among themselves[1].” How exactly the phrase “the chairman cannot exercise his or her authority for legal or other reasons” is interpreted or applied affects whether others may legally exercise the chairman’s authority as a substitute. The 110-Tai-Shang-3224 Civil Decision rendered by the Supreme Court disagreed with the lower courts on this issue. The courts’ respective opinions are worth examining and comparing. Below are summaries of the case and the respective court opinions.
1. Facts of the case
Chairman De-Mei Zhong of the Chang Yung-Fa Charity Foundation convened the board meeting on April 17th of 2020. Originally, the director re-election proposal was listed as the 10th item, but board member Guo-Zheng Chang proposed to move the re-election to item 1. Chairman Zhong thus dismissed the board meeting and left together with five other board members, while 9 other members remained. According to Article 43, Paragraph 1 of the Foundation Act, a simple majority of the present board members, i.e. 8 directors, elected Guo-Zheng Chang as moderator and continued the meeting, during which they dismissed Zhong as chairman and instead elected board member Jing-Ming Wu as the new chairman.
2. The opinion of the Taiwan High Court
The Taiwan High Court ruled that once chairman De-Mei Zhong convened and then left the board meeting, she, in fact, could not exercise her authority as chairman for the meeting. Since the Chang Yung-Fa Charity Foundation has no vice-chairman and chairman Zhong did not appoint a substitute, the present board members elected Guo-Zheng Chang as a temporary moderator according to Article 43, Paragraph 1 of the Foundation Act and continued the meeting, resulting in the dismissal of Zhong and the election of Jing-Ming Wu as the new chairman. The court ruled that the process is legally legitimate.
3. The opinion of the Supreme Court
The Supreme Court ruled that the phrase “the chairman cannot exercise his or her authority for legal or other reasons” refers to either incapable (such as if the chairman were detained) or legally prohibited (such as a temporary injunction on the exercise of the authority of the chairman), and does not include cases where the chairman can but passively refuses to exercise his or her authority. In this case, since board member Guo-Zheng Chang’s proposal of changing the meeting agenda did not include threatening or frightening speech and may not cause disorder interrupting the meeting, chairman Zhong dismissed the meeting and left the premises, refusing to moderate the meeting, which may be considered as that she was still capable of exercising her authority but passively declined to. Therefore, there is still doubt on whether chairman Zhong factually cannot exercise her authority, so the Supreme Court repealed and remanded the case.
The final ruling on whether Chang Yung-Fa Charity Foundation’s chairman dismissal and election procedure was flawed may affect the legality of relevant board resolutions under the new chairman, making the case worth following.
