An external legal act of a chairman shall not be effective to the company if it is obviously known to the trading counterpart that the legal act is not approved by way of a resolution in a board meeting or if the resolution is defective(Taiwan)

2017.7.13
Angela Wu

The Supreme Court rendered the 106-Tai-Shang-133 Civil Decision of July 13, 2017 (hereinafter, the “Decision”), holding that an external legal act of a chairman shall not be effective to the company if it is obviously known to the trading counterpart that the legal act is not approved by way of a resolution in a board meeting or if the resolution is defective.

According to the facts underlying this Decision, Company A in this case asserted that it was the owner of the trademark at issue. During Defendant B’s tenure as Company A’s chairman, he failed to call a board meeting or did so without notifying the supervisors before assigning the trademark at issue to C. Therefore, a complaint was filed to compel C to file a transfer or amendment registration to change the exclusive rights owner of the trademark at issue to Company A (hereinafter, the “Transfer of Exclusive Usage Right of the Trademark at Issue”). The original trial court ruled against Company A. Dissatisfied, Company A appealed.

It was first pointed out in the Decision that Article 202 of the Company provides: “Business operations of a company shall be executed pursuant to the resolutions to be adopted by the board of directors, except for the matters the execution of which shall be effected pursuant the resolutions of the shareholders’ meeting as required by this Law or the Articles of Incorporation of the company.” Article 218-2 of the same law grants supervisors the right to attend a board meeting and state their opinions, since the supervisors are the supervisory body of the company’s business and cannot discharge their responsibilities without knowing the business status of the company. Article 204 of the same law requires that the supervisors shall be notified of the organization of a board meeting seven days in advance with the reasons specified. To ensure the lawful operation of power and safeguard the interest of all shareholders, the board of directors, as the central power organ of the company, certainly shall strictly require the procedure for the calling a board meeting and its resolution method to meet the above requirements.
Although there is no specific provision that requires that Article 189 of the same law shall apply in the event of any defect to the procedure for calling a board meeting or to its resolution method, still if the above requirements are violated, any resolution so adopted shall be invalid according to the gist of the provision that a board meeting is a forum for an exchange of views among the board members to decide the business guidelines of the company. Article 208, Paragraph 3 of the same law stipulates that the chairman of a company limited by shares shall be the chairman of the shareholders’ meetings, board meetings and managing directors’ meetings internally and represent the company externally. However, an external legal act of a chairman shall not be effective to the company if it is obviously known to the trading counterpart that the legal act is not approved by way of a resolution in a board meeting or if the resolution is defective

It was further pointed out that whether a board meeting was convened, whether the supervisors had been notified by the board to attend the meeting, and even whether a resolution adopted in a board meeting is valid would affect important offensive and defensive methods concerning whether the transfer of the trademark at issue was valid. The original trial court was unlawful for failure to specifically examine the testimonies of relevant witnesses in this regard. Therefore, the original decision was reversed and remanded.