May 2024
Elva Chuang and Tina Lee
In response to global sustainability initiatives and the goal of net-zero emissions by 2050, Taiwan Financial Supervisory Commission (FSC) issued the “the Sustainable Roadmap for Sustainable Development of Listed and OTC-traded Companies” on March 3, 2022 and the “the Sustainable Development Action Plan for Listed and OTC-traded Companies” on March 28, 2023. These aim to assist all listed and OTC-traded companies in achieving sustainability goals and enhancing international competitiveness in phases. The important relevant regulations that will take effect starting from 2024 are summarized below.
1. Deepening the Culture of Corporate Sustainability Governance
- At least one-third of the board seats of listed and OTC-traded companies must be held by independent directors.
To continuously promote and strengthen the functions of independent directors, starting in 2024, listed and OTC-traded companies with a capital of NT$10 billion or more must have at least one-third of their board seats held by independent directors. From 2027 onwards, the FSC will require all listed and OTC-traded companies to comply with this regulation.
- Independent directors of listed and OTC-traded companies shall not serve more than three consecutive terms.
Starting in 2024, when listed and OTC-traded companies re-elect their independent directors based on the term of the board, half of the independent directors shall not serve more than three consecutive terms (9 years), in order to strengthen the independence. From 2027 onwards, it will be further required that all independent directors of listed and OTC-traded companies shall not serve more than three consecutive terms.
- Increased percentage of female directors of listed or OTC-traded companies
In light of nearly 30% of companies in Taiwan still do not have any female directors, and the ratio of companies with at least one-third female directors remains low, the FSC requires that starting from 2024, listed and OTC-traded companies must appoint at least one director of a different gender upon the expiration of the current board’s term, in order to align with international trends. Furthermore, starting from 2025, listed and OTC-traded companies where directors of either gender do not hold at least one-third of the board seats must specifically disclose the reasons and measures taken in their annual reports.
2. Leading Corporate Net-Zero Efforts and Enhancing Sustainability Information Disclosure
- Starting in 2024, listed and OTC-traded companies must disclose climate-related information in their annual reports.
Starting in 2024, to progressively enhance climate-related disclosures by Taiwanese listed and OTC-traded companies, listed and OTC-traded companies must disclose climate-related information in their annual reports, including:
(1) Implementation of climate-related information; and
(2) The company’s greenhouse gas inventory and assurance for the past two years (refer to Article 10 and Appendix 2-2-3 of the Regulations Governing Information to be Published in Annual Reports of Public Companies).
Specifically regarding greenhouse gas inventory and assurance information:
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- Financial institutions, listed and OTC-traded companies with paid-in capital of NT$10 billion or more, and steel and cement industries must complete the disclosure starting in 2024.
- Listed and OTC-traded companies with paid-in capital below NT$10 billion will disclose in phases based on their scale. (For the detailed disclosure schedule, refer to the FSC’s letter No. 11203852314)
Additionally, to encourage listed and OTC-traded companies to set their own carbon reduction targets, strategies, and concrete action plans, starting from 2024, the Taiwan Stock Exchange (TWSE) will incorporate the “disclosure of 2030 carbon reduction targets, strategies, and action plans” as an indicator in the Corporate Governance Evaluation for listed companies.
3. Strengthening Communication with Stakeholders
- Enhancement of the disclosure of information on majority shareholdings
The FSC has amended and issued the “Regulations Governing the Declaration of Acquisition of Shares in Accordance with Article 43-1, Paragraph 1 of the Securities and Exchange Act” on January 30, 2024. Effective from May 10, 2024, the threshold for disclosing major shareholdings will be lowered from 10% to 5%, and the reporting method will change from paper-based to electronic filing.
- Listed and OTC-traded companies shall upload their shareholders’ meeting handbooks and annual report information earlier than usual
To provide investors with earlier access to information for making voting decisions at shareholders’ meetings, starting in 2024:
Listed and OTC-traded companies with capital between NT$2 billion and NT$10 billion must upload their shareholders’ meeting handbooks and supplementary meeting materials 30 days before the meeting date. These companies must also upload their annual reports 14 days before the shareholders’ meeting.
From 2026 onwards, all listed and OTC-traded companies, regardless of capital size, will be required to submit shareholders’ meeting handbooks and annual reports earlier according to the above timeframes.
This regulatory change aims to improve transparency by mandating the earlier disclosure of key shareholder meeting materials and annual reports, allowing investors more time to review the information before voting.
- Enhancing Timeliness of Financial Information Disclosure for Listed Companies
According to the “Corporate Governance 3.0 – Sustainable Development Blueprint” announced by Taiwan Securities and Futures Bureau on February 22, 2024, starting from 2024, all listed and OTC-traded companies must disclose their self-prepared financial information for the previous year within 75 days after the end of the fiscal year. This move aims to further enhance transparency in information disclosure. This regulatory change emphasizes the importance of timely disclosure to increase transparency.
- Publishing Important Information in Both Chinese and English
The FSC requires that starting from 2024, all listed and OTC-traded companies with paid-in capital of NT$600 million or more must publish important information in both Chinese and English.
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