The Taiwan High Court rendered the 107-Shang-1132 Civil Decision of January 30, 2019 (hereinafter, the “Decision”), holding that endorsement and delivery of a stock are the only means to transfer a registered stock. If this requirement is violated, the transfer will not be effective. Even if an individual has been recorded as a shareholder of the company, still this does not undermine the right that may be exercised by a true shareholder over the company.
According to the facts underlying this Decision, the Appellee asserted as follows. The Appellant was Company A, the Appellee was a shareholder of Company A, and two other shareholders were individual B, Company A’s legal representative, and individual C. Since the Appellee’s management philosophy was not compatible with that of B, the Appellee proposed to wind up the company, but B indicated that the Appellee’s shares could be transferred to him. The parties did not reach a consensus about how to liquidate or settle the company’s assets. However, B conducted company share amendment registration without authorization. Therefore, a request was made to confirm that the Appellee was still a shareholder of Company A. The court subsequently ruled in favor of the Appellee. Dissatisfied, the Appellant appealed.
According to the Decision, transfer by endorsement is the only way to transfer a registered stock and only through transfer by endorsement can the transferee become a lawful holder of the stock. If the registration in the shareholders’ roster is fabricated or false, such registration certainly cannot serve as the sole basis for the existence of the shareholder’s right over the company. Therefore, endorsement and delivery of a stock are the only means to transfer a registered stock. If this formal requirement is violated, the transfer shall not be effective. Even if an individual has been recorded as a shareholder of the company, still the shareholder’s right exercised by the true shareholder over the company will not be undermined.
It was further pointed out in this Decision that the Appellee in this matter had not endorsed and delivered the stock at issue to B. Therefore, the share transfer would not be effective and the Appellee was still as shareholder of the company in accordance with Article 164 of the Company Law before amendment. Before the stock at issue was endorsed and delivered by the Appellee, B obviously engaged in a fraudulent act by leveraging his position and retaining a bookkeeper to handle the company share amendment registration without authorization. Even though his subjective criminal intent for criminal conversion or forgery of documents was lacking and a final non-prosecutorial disposition was rendered by the Taipei District Prosecutors Office, this did not affect the finding of false registration of the company’s stock. Therefore, Company A certainly could not deny the Appellee’s shareholder’s right based on such false record. Since the original decision was not erroneous, the Appellant’s appeal was dismissed.