If a shareholders’ meeting has been objectively convened via a board resolution, and a resolution has been lawfully adopted, this resolution is then not absolutely invalid or non-existent; and even if the resolution to convene the meeting is defective, this would only give rise to the issue of filing a complaint with the court to revoke this resolution (Taiwan)

Albert Yen

The Supreme Court rendered the 109-Tai-Shang-922 Decision of June 24, 2020 (hereinafter, the “Decision”), holding that if a shareholders’ meeting has been objectively convened via a board resolution, and a resolution has been lawfully adopted, this resolution is then not absolutely invalid or non-existent; and even if the resolution to convene the meeting is defective, this would only give rise to the issue of filing a complaint with the court to revoke this resolution.

According to the facts underlying this Decision, the Appellant asserted that he was a shareholder of the Appellee.  The Appellee convened a general shareholders’ meeting (hereinafter, the “Shareholders’ Meeting at Issue”).  Although a resolution (hereinafter, the “Resolution at Issue”) to dissolve the Appellee and appoint liquidators was adopted, the Shareholders’ Meeting at Issue was convened by the board of directors consisting of A, B and C, and among them C had not been appointed in the Appellee’s shareholders’ meeting and so did not have the qualification of a director.   Since a board of director could not be lawfully constituted by merely A and B, the Shareholders’ Meeting at Issue was convened by persons without the authority to do so, and the Resolution at Issue do not exist.  Therefore, the court was requested to declare that the Resolution at Issue do not exist.

According to the Decision, to convene a shareholders’ meeting, the chairman of the board should first convene a board meeting, which will then adopt a resolution to convene the shareholders’ meeting.  However, the board of directors is merely an internal organ of a company, and whether the resolution adopted by it to convene a shareholders’ meeting is defective is not easily known to the public.  If a shareholders’ meeting has been convened via a board resolution, and if a resolution has been lawfully adopted in such shareholders’ meeting, the resolution adopted in such shareholders’ meeting is then not absolutely invalid or non-existent.  Even if the board resolution to call such shareholders’ meeting is defective, this would merely give rise to the issue of filing a complaint with the court to revoke the resolution under Article 189 of the Corporation Law.

It was further indicated in this Decision that although C was not lawfully appointed as a director by the shareholders’ meeting of the Appellee, since he was registered as a director in the registration form of the Appellee, the fact that he had not been lawfully appointed is actually not knowable to other shareholders or external third parties.  In light of the legitimate expectation of other shareholders and external third parties and the stability of the law system and in view of that a board of directors is merely an internal organ of a company, although the Appellee’s board meeting did not lawfully adopt the resolution to convene the Shareholders’ Meeting at Issue, still A presided over the Shareholders’ Meeting at Issue as the chairman of the board, and the Resolution at Issue were lawfully adopted, this falls under the issue pertaining to whether a complaint may be filed with the court to revoke a resolution under Article 189 of the Company Law.  Therefore, the Appellant’s complaint to confirm the non-existence of the Resolution at Issue should not be granted.