The Taiwan High Court rendered the 106-Shang-254 Civil Decision of June 30, 2017 (hereinafter, the “Decision”), holding that if the complete supporting documentation under Article 192-1, Paragraph 4 of the Company Law for a director candidate nominated by shareholders is not attached, the board of directors may exclude such nominee from the list of candidates without sending a correction notice after verifying such circumstance.
The Defendant in this Decision is a publicly offered company which adopts a director nomination system. The Plaintiff was a shareholder of the Defendant’s and nominated two candidates for the election of the Defendant’s independent directors. After being notified by the Defendant’s personnel to supplement documentation, the Plaintiff supplemented the documentation. However, during a board meeting convened to examine the candidates, the Defendant did not grant the Plaintiff with an opportunity to supplement the documentation and resolved that the independent director candidates nominated by the Plaintiff would be excluded from the list of candidates (hereinafter, “Resolution A”) on the ground that the Plaintiff had failed to attach supporting documentation under Article 192-1, Paragraph 4 of the Company Law. The Defendant’s shareholders’ meeting subsequently adopted a resolution to “re-elect all directors (including two independent directors)” (hereinafter, “Resolution B”) according to Resolution A. Therefore, the Plaintiff sought a declaratory judgment to vitiate both Resolution A and Resolution B.
According to the Decision, the Plaintiff was a shareholder holding over 1% of the total outstanding shares and could propose a written list of independent director candidates to the Defendant during the period in which the Defendant accepted nomination of director candidates and submit the names, academic backgrounds and experiences of the nominees as well as a letter of commitment indicating the willingness to serve as directors if they are elected, a statement indicating the candidates are free from any circumstance under Article 30 of the Company Law and other relevant supporting documents.
However, the Company Law, the Securities Exchange Law and relevant laws and regulations do not require prior notification to request correction by the nominating shareholders in the event of deficiency in the required documentation or supporting documents for a shareholder’s nomination of independent directors. In addition, an observation of the matters relating to the nomination of director candidates announced by the Defendant does not indicate that the Defendant was obligated to notify the Plaintiff to supplement deficient supporting documents. Moreover, even if the Defendant’s personnel had notified the Plaintiff to supplement supporting documents, the Plaintiff did not become obligated to notify the Plaintiff to supplement relevant supporting documents for the nominees, either. Therefore, if the Plaintiff failed to supplement the supporting documents under Article 192-1, Paragraph 4 of the Company Law, which was verified by the Defendant’s board of directors, there was certainly no procedure for awaiting a correction notice. To wit, the nominees could be excluded from the list of director candidates. Therefore, Defendant’s Resolution A and Resolution B were both legal, and the Plaintiff’s complaint to set aside the two resolutions was certainly groundless. Accordingly, the original decision was reversed and a decision was rendered to dismiss the Plaintiff’s complaint.