July 2025
MOEA Issues Guidelines on the Determination Standards of Fiduciary Duties of Responsible Persons — Observations on the Interpretation Letter (Taiwan)
On March 12, 2025, the Department of Commerce under the Ministry of Economic Affairs (“MOEA”) issued Interpretation Letter No. 11401401940 ("MOEA Letter"), providing clarification on the fiduciary duty stipulated under Article 23, Paragraph 1 of the Company Act, and setting forth specific standards for its determination. The MOEA Letter explicitly states that responsible persons (such as directors), in the performance of their duties, shall act in good faith, follow the principle of prioritizing the best interests of the company, and comply with the company's Articles of Incorporation and internal regulations in carrying out appropriate business judgment procedures, while avoiding conflicts between personal and corporate interests.
In other words, the core of fiduciary duty can be viewed from two aspects:
(1) Responsible persons must pursue the company’s best interests; and
(2) Responsible persons must avoid conflicts of interest.
Furthermore, since fiduciary duty is an abstract and indeterminate legal concept, the MOEA Letter references the reasoning in the Supreme Court Civil Judgment (2023) Tai-Shang-Zi No. 1306 to propose concrete standards as follows:
1. Violation of Explicit Provisions of the Company Act Constitutes a Breach of Fiduciary Duty
To objectively and reasonably assess whether a company officer has fulfilled fiduciary duties while performing their functions, prevailing judicial opinions tend to find a breach of fiduciary duty in cases of contravention of the following statutory provisions:
2. Other Cases May Refer to the " Commercial Case Adjudication Rules " as Standards for Fiduciary Duty
For other types of cases, the MOEA Letter also introduces a concept similar to the business judgment rule in U.S. law, suggesting that the assessment of whether a company officer has violated fiduciary duty may refer to the considerations set forth under Article 37 of the Commercial Case Adjudication Rules. These include, for example:
We affirm that the MOEA Letter’s explicit articulation of statutory provisions and judicial standards provides a more solid operational basis for interpreting the essence of fiduciary duty in both corporate governance and judicial practice. The Letter further clarifies directors’ obligations in the decision-making process, such as information verification, risk assessment, and disclosure of conflicts of interest, thereby offering significant guidance for strengthening internal corporate governance mechanisms.
Nevertheless, given today’s increasingly complex commercial landscape and rapidly advancing technologies, corporate decisions often require a high degree of professional judgment and must address multiple challenges, including market risks, environmental changes, and economic uncertainties. These realities make decision-making inherently difficult.
We contend that, to encourage responsible persons to responsibly undertake decision-making and pursue innovation, the legal framework should avoid imposing liability for damages solely because a business transaction resulted in a loss. Such an approach could induce undue caution and impair effective corporate management, ultimately harming shareholder interests. Therefore, losses arising from business judgment should not be attributed based on hindsight or outcomes alone. Instead, whether fiduciary duties were fulfilled should be assessed under the premise of respecting managerial discretion, based on objective and reasonable standards.
In other words, the core of fiduciary duty can be viewed from two aspects:
(1) Responsible persons must pursue the company’s best interests; and
(2) Responsible persons must avoid conflicts of interest.
Furthermore, since fiduciary duty is an abstract and indeterminate legal concept, the MOEA Letter references the reasoning in the Supreme Court Civil Judgment (2023) Tai-Shang-Zi No. 1306 to propose concrete standards as follows:
1. Violation of Explicit Provisions of the Company Act Constitutes a Breach of Fiduciary Duty
To objectively and reasonably assess whether a company officer has fulfilled fiduciary duties while performing their functions, prevailing judicial opinions tend to find a breach of fiduciary duty in cases of contravention of the following statutory provisions:
- Article 209: Approval for directors engaging in competing businesses
- Article 196: Determination of director compensation
- Article 206: Disclosure and voting obligations in conflict-of-interest transactions
- Article 223: Transactions involving directors and the supervisory representative authority
2. Other Cases May Refer to the " Commercial Case Adjudication Rules " as Standards for Fiduciary Duty
For other types of cases, the MOEA Letter also introduces a concept similar to the business judgment rule in U.S. law, suggesting that the assessment of whether a company officer has violated fiduciary duty may refer to the considerations set forth under Article 37 of the Commercial Case Adjudication Rules. These include, for example:
- Whether the officer acted in good faith and with integrity;
- Whether the decision was based on sufficient information;
- Whether any conflicts of interest existed, or whether independence or impartiality was compromised;
- Whether discretion was abused;
- Whether proper oversight of company operations was exercised.
We affirm that the MOEA Letter’s explicit articulation of statutory provisions and judicial standards provides a more solid operational basis for interpreting the essence of fiduciary duty in both corporate governance and judicial practice. The Letter further clarifies directors’ obligations in the decision-making process, such as information verification, risk assessment, and disclosure of conflicts of interest, thereby offering significant guidance for strengthening internal corporate governance mechanisms.
Nevertheless, given today’s increasingly complex commercial landscape and rapidly advancing technologies, corporate decisions often require a high degree of professional judgment and must address multiple challenges, including market risks, environmental changes, and economic uncertainties. These realities make decision-making inherently difficult.
We contend that, to encourage responsible persons to responsibly undertake decision-making and pursue innovation, the legal framework should avoid imposing liability for damages solely because a business transaction resulted in a loss. Such an approach could induce undue caution and impair effective corporate management, ultimately harming shareholder interests. Therefore, losses arising from business judgment should not be attributed based on hindsight or outcomes alone. Instead, whether fiduciary duties were fulfilled should be assessed under the premise of respecting managerial discretion, based on objective and reasonable standards.
