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Announcements2015-02-06
Draft Amendment of The Company “Act Regarding Closed Corporations” - Draft of Research Commissioned by Executive Departments

The key to Taiwan’s future lies in tech ventures. However, the proliferation of tech ventures depends upon a regulatory basis that enables entrepreneurs and investors to make detailed, comprehensive contractual arrangements and organizational plans that correspond to the high risk nature of the tech venture industry. This facilitates pursuit of the actualization of high future returns. However, many mandatory regulations limit standards of current Company Act pertaining to limited liability and incorporated companies, which drastically limits planning capabilities for entrepreneurs and investors.

The reality is that space for planning of responsibilities and obligations between entrepreneurs and investors is not only a boon for the development of tech ventures but also a need for this space exists for traditional small and medium enterprises as well. Both tech ventures and small and medium enterprises require close coordination and cooperation between shareholders during operations. This is the reason why shareholder structure often appears fairly closed in the initial stages of development, which conforms to the identifying traits of “closed corporations”, as they are often referred to from an academic standpoint.

Articles of association or shareholders’ agreements are clearly a better mechanism for arranging the rights and obligations between a company and its shareholders for these types of corporations, as opposed to regulations for incorporated companies put in place by legislators for the sake of large corporations. This is why the draft will significantly relax mandatory regulations that exist in the current Company Act in order to establish a legal environment that meets the needs of developing tech ventures and small and medium enterprises. We look forward to the future, where entrepreneurs and investors will be able to create articles of association or contractual regulations that best benefit corporate operations.

We welcome input from all interested parties on the content of this draft. Please visit the vTaiwan Forum: https://vtaiwan.tw/

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