The audit committees of companies in Taiwan have the dual functions of the functional committee’s business execution and the supervisor's supervision. In line with the setup of an audit committee by all TWSE and TPEx companies to replace supervisors this year (2022), the FSC plans to review the current audit committee's terms of reference. With reference to the foreign practice that the functions and powers are exercised through audit committee meetings in most of the countries where audit committees are set up, and that the collegial system is adopted for audit committees and the supervision function of the audit committee can be implemented through brainstorming in audit committee meetings, in order to protect minority shareholders' rights and interests and maintain the stable operation of the company, it is proposed to amend the Securities and Exchange Act to specify that litigation against a director, right to convene a shareholders' meeting, and right of a director to represent the company when dealing on behalf of the company or for himself shall be exercised by the audit committee in a collegial manner; in addition, the operating procedures regarding when the audit committee cannot meet due to legitimate reasons will be stipulated to be in line with the market practice.
A total of 3 amendments are to be made to the Securities and Exchange Act this time, and the key points are as follows:
I.    The litigation against directors, the right to convene shareholders' meetings and the right of a director to represent the company when dealing for him/herself or on behalf of the company shall be done through the audit committee in a collegial manner: As the company's litigation or transaction representation are important matters to the company, they shall be discussed comprehensively through the collegial system; therefore, it will be regulated that the litigation against directors, the right to convene shareholders' meetings and the right of a director to represent the company when dealing for him/herself or on behalf of the company shall be done through the audit committee in a collegial manner (amendment to Article 14-4).
II.    When the audit committee cannot be convened due to any reason, the matters to be proposed to the audit committee shall be carried out by a special resolution of all the directors of the board: Considering the fact that an audit committee meeting may not be convened due to the fact that the independent directors of the audit committee may resign or be dismissed for any reason and there is only one independent director remaining, or due to force majeure, in order to avoid any impact on the company's operations, the addition will be made to paragraph 1, Article 14-5 of the Securities and Exchange Act that if an audit committee meeting is unable to be convened due to justifiable reasons and therefore no resolution can be reached, a special resolution shall be made by all the directors of the board. In addition, the independent director members of the audit committee, based on their status as members of the audit committee, are still required to give opinions on whether they agree with the financial reporting matters. Considering that a violation of the foregoing provisions is a violation of corporate governance, the relevant punishment provisions will be added in order to achieve the administrative management purpose (amendment to Articles 14-5 and 178).

The FSC said that, the general description of the draft and a comparison table of the amended articles will be published on the FSC website. For any comments, please visit the webpage “Advance Notice of Draft Regulations” on the website “Laws and Regulations Retrieving System” of the FSC (website address: http://law.fsc.gov.tw/) and state your comments, or contact the Securities and Futures Bureau of the FSC within 30 days from the date of the announcement.

Contact unit:    Corporate Finance Division, Securities and Futures Bureau
Tel: (02) 27747100
For questions, please write to: FSCmail