The Supreme Court rendered the 108-Tai-Shang-789 Decision of March 26, 2020 (hereinafter, the “Decision”), holding that when the amount of damage sustained by a company is calculated for the commission of the offense of non-arm’s length transaction under the Securities and Exchange Law, if the appraisal of the property value associated with complicated and risky transaction behavior is involved, the profit or loss of the property should be calculated, and the relationship between property impairment and such transaction should be examined.
According to the facts in this case, Company A (actual legal representative: X) mortgaged its land as security for a loan of NT$755 million from Trust Company B. Since Company A failed to pay interest normally, it was thus recorded by Trust Company B in its overdue receivables accounts. However, X planned to first transfer the land to Y and two other individuals before buying it back on his own or with money pooled together with other people. After a board resolution was obtained, Company A sold the land at issue to Y and others and entered into a relevant real estate sales contract with them. Without notifying Trust Company B, it was agreed that Y and others would assume Company A’s outstanding loan obligation to Trust Company B. Y and others subsequently only paid NT$11.25 million without paying the remaining price of the land at issue.
The prosecutor asserted that under such arrangements, Company A sustained a significant loss since its obligation to Trust Company B still exists, it was only paid NT$11.25 million and still lost approximately NT$743,110,000 for losing the ownership of the land at issue. Therefore, X was indicted for the offense of non-arm’s length transaction in accordance with Article 171, Paragraph 1, Subparagraph 2 of the Securities and Exchange.
In this case, the court pointed out that since “significant harm to the company” is one of the requirements of the crime under Article 171, Paragraph 1, Subparagraph 2 of the Securities and Exchange Law, it is by nature a consequential offense. As to the so-called “significant harm to the company,” the amount of damage sustained by the company should be compared with the size of the company (such as the annual turnover and assets of the company) to measure if the harm is significant. Although the time when an actor’s criminal act succeeded should be the timing to calculate the amount of the damage sustained by a company, still if the appraisal of property value associated with a complicated and risky transaction is involved, the property profit or loss should be calculated by financial methods and the connections between the property impairment and the non-arm’s length transaction should be examined to reflect the nature of a consequential offense.
The court in this case believed that the original decision only based its finding of whether Company A had suffered significant harm on the price difference and profit obtained by the Appellant without considering the actual size of Company A (e.g., the annual turnovers and assets of the company) as the basis to ascertain the amount of impairment to the assets of Company A as a result of the Appellant’s above-mentioned non-arm’s length transaction, the extent to which the operation or size of the company was affected by the amount of such damage, the possibility of using data such as percentages to depict the specific damage and the hardship, if any, to the company’s operation or finance. Since the original decision jumped to a conclusion unfavorable to the Appellant, it was certainly unlawful for failure to perform the court’s duty to investigate and for insufficiency of grounds in the original decision.