March 21, 2025
May a Shareholder Exercise Either the Right to Annul a Shareholder Resolution or the Right to Request Share Repurchase, But Not Both?–A Brief Analysis of Supreme Court Civil Judgment No. 2646 (2023) (Taiwan)
I. Case Summary
On April 15, 2022, Company B convened an extraordinary shareholders’ meeting and resolved to approve a merger with Company A (the appellant), designating Company A as the surviving company (hereinafter referred to as “the Resolution”). On April 27 of the same year, a shareholder of Company B (the appellee) exercised his right to request Company B to repurchase his shares. Later, on May 12, the appellee filed a lawsuit under Article 189 of the Company Act, seeking the annulment of the Resolution on the grounds of procedural defects. On July 13, the appellee lost his shareholder status due to the formal transfer of shares to Company B.
II. Issue
According to Article 189 of the Company Act, the plaintiff filing a lawsuit to annul a shareholders’ meeting resolution must hold shareholder status to satisfy the standing to bring suit. If the appellee, after initiating the lawsuit, transferred all of their shares to the company due to exercising the right to request a share repurchase, thereby losing shareholder status before the conclusion of oral arguments in the trial court, do they still have a legitimate interest in seeking judicial relief?
III. Court Opinions
1. Intellectual Property and Commercial Court Civil Judgment No. 13 (2022): Positive Opinion
The trial court held that the appellee still retained his status as a shareholder of Company B and had the standing to bring suit. Even though the appellee lost the shareholder status due to exercising the right to request a share repurchase during the litigation, he still had a legitimate interest in seeking judicial relief. The court’s reasoning was as follows:
(1) Under Article 12, Paragraph 4 of the former Business Mergers and Acquisitions Act (now relocated to Paragraph 5 of the same article), the right to request share repurchase may become ineffective if the merger is subsequently canceled. In such a scenario, the appellee’s shareholder status could be restored. Therefore, the appellee’s right to annul the Resolution should not be denied solely because he has exercised the right to request share repurchase.
(2) If a dissenting shareholder who files a lawsuit would lose his shareholder status upon exercising the right to request share repurchase, and thus be unable to continue the annulment action, it could lead to unreasonable consequences. Specifically, to preserve the validity of the shareholders’ meeting resolution, the company might choose to fully pay the repurchase price only to dissenting shareholders who filed a lawsuit while refusing to pay those who did not, resulting in inconsistent treatment of dissenting shareholders based on whether they initiated legal action.
2. Supreme Court Civil Judgment No. 2646 (2023): Negative Opinion
The Supreme Court adopted a contrary view, ruling that a dissenting shareholder who filed an annulment action but subsequently exercised the right to request share repurchase, thereby transferring their shares to the company and losing shareholder status, no longer had a legal interest in the lawsuit. The court provided the following rationale:
(1) Although Article 12, Paragraph 4 of the former Business Mergers and Acquisitions Act stipulates that the right to request share repurchase may become ineffective if the merger is subsequently canceled, thereby restoring the shareholder’s status, this does not justify the continuation of the annulment lawsuit. Since the objectives of "canceling the merger " and "annulling the merger through a dissenting shareholder’s lawsuit" are essentially the same, adopting the negative view does not place the appellee at a greater disadvantage. Therefore, the annulment action filed under Article 189 of the Company Act lacks necessity for legal protection.
(2) When an appellee exercised the right to request share repurchase, he could have foreseen that the company would repurchase his shares at a fair price, resulting in the loss of the shareholder status. This outcome remains the same regardless of whether the repurchase was made pursuant to the shareholder’s request, mutual agreement, or a court ruling. Since the appellee voluntarily transferred his shares back to the company and lost shareholder status, he no longer had a legitimate interest in continuing the annulment action.
IV. Conclusion
Both the right to annul a shareholders’ meeting resolution under Article 189 of the Company Act (a collective right) and the right to request share repurchase under Article 186 of the same Act (an individual right) are rights exercisable based on shareholder status. In light of the Supreme Court’s ruling in Civil Judgment No. 2646 (2023), it is worth considering whether a dissenting shareholder can choose to exercise only one of these rights—either the right to annul the resolution or the right to request share repurchase.
On April 15, 2022, Company B convened an extraordinary shareholders’ meeting and resolved to approve a merger with Company A (the appellant), designating Company A as the surviving company (hereinafter referred to as “the Resolution”). On April 27 of the same year, a shareholder of Company B (the appellee) exercised his right to request Company B to repurchase his shares. Later, on May 12, the appellee filed a lawsuit under Article 189 of the Company Act, seeking the annulment of the Resolution on the grounds of procedural defects. On July 13, the appellee lost his shareholder status due to the formal transfer of shares to Company B.
II. Issue
According to Article 189 of the Company Act, the plaintiff filing a lawsuit to annul a shareholders’ meeting resolution must hold shareholder status to satisfy the standing to bring suit. If the appellee, after initiating the lawsuit, transferred all of their shares to the company due to exercising the right to request a share repurchase, thereby losing shareholder status before the conclusion of oral arguments in the trial court, do they still have a legitimate interest in seeking judicial relief?
III. Court Opinions
1. Intellectual Property and Commercial Court Civil Judgment No. 13 (2022): Positive Opinion
The trial court held that the appellee still retained his status as a shareholder of Company B and had the standing to bring suit. Even though the appellee lost the shareholder status due to exercising the right to request a share repurchase during the litigation, he still had a legitimate interest in seeking judicial relief. The court’s reasoning was as follows:
(1) Under Article 12, Paragraph 4 of the former Business Mergers and Acquisitions Act (now relocated to Paragraph 5 of the same article), the right to request share repurchase may become ineffective if the merger is subsequently canceled. In such a scenario, the appellee’s shareholder status could be restored. Therefore, the appellee’s right to annul the Resolution should not be denied solely because he has exercised the right to request share repurchase.
(2) If a dissenting shareholder who files a lawsuit would lose his shareholder status upon exercising the right to request share repurchase, and thus be unable to continue the annulment action, it could lead to unreasonable consequences. Specifically, to preserve the validity of the shareholders’ meeting resolution, the company might choose to fully pay the repurchase price only to dissenting shareholders who filed a lawsuit while refusing to pay those who did not, resulting in inconsistent treatment of dissenting shareholders based on whether they initiated legal action.
2. Supreme Court Civil Judgment No. 2646 (2023): Negative Opinion
The Supreme Court adopted a contrary view, ruling that a dissenting shareholder who filed an annulment action but subsequently exercised the right to request share repurchase, thereby transferring their shares to the company and losing shareholder status, no longer had a legal interest in the lawsuit. The court provided the following rationale:
(1) Although Article 12, Paragraph 4 of the former Business Mergers and Acquisitions Act stipulates that the right to request share repurchase may become ineffective if the merger is subsequently canceled, thereby restoring the shareholder’s status, this does not justify the continuation of the annulment lawsuit. Since the objectives of "canceling the merger " and "annulling the merger through a dissenting shareholder’s lawsuit" are essentially the same, adopting the negative view does not place the appellee at a greater disadvantage. Therefore, the annulment action filed under Article 189 of the Company Act lacks necessity for legal protection.
(2) When an appellee exercised the right to request share repurchase, he could have foreseen that the company would repurchase his shares at a fair price, resulting in the loss of the shareholder status. This outcome remains the same regardless of whether the repurchase was made pursuant to the shareholder’s request, mutual agreement, or a court ruling. Since the appellee voluntarily transferred his shares back to the company and lost shareholder status, he no longer had a legitimate interest in continuing the annulment action.
IV. Conclusion
Both the right to annul a shareholders’ meeting resolution under Article 189 of the Company Act (a collective right) and the right to request share repurchase under Article 186 of the same Act (an individual right) are rights exercisable based on shareholder status. In light of the Supreme Court’s ruling in Civil Judgment No. 2646 (2023), it is worth considering whether a dissenting shareholder can choose to exercise only one of these rights—either the right to annul the resolution or the right to request share repurchase.
