In recent years, a growing number of entrepreneurs around the world started to fervently promote the notion that contrary to traditional practice, enterprises should not only look after the interests of their shareholders, but also, those of their stakeholders. As a response to this movement, many jurisdictions began enacting legislation that provides for a new type of legal entity specially tailored to the purposes and characteristics that these entrepreneurs were seeking. Examples of these are the Community Interest Company legislation in the United Kingdom; the Benefit Corporation legislation enacted in 33 states (and the District of Columbia) in the United States; and the Societá Benefit legislation in Italy. The enterprises created under these three examples of legislation are allowed to have a dual purpose: (1) maximize shareholders’ interests and (ii) take on one or more social interests to benefit the enterprises’ stakeholders.
The discussions regarding the creation of a similar type of legislation in Taiwan started to gain momentum since the announcement of proposed amendments to Taiwan’s Company Act (the “Act”). The Ministry of Economic Affairs (the “MOEA”) was tasked with preparing the first draft amendments. In February 2016, the MOEA organized the Act’s Amendment Committee (the “Committee”), with the aim of gathering voices from different interest groups, including the private sector and academia.
During the committee’s discussions, the inclusion of a chapter providing for “benefit corporations” was raised and supported by a number of committee members. The hope was to allow recognition and codification of benefit corporations under the Act in an attempt to promote socially responsible enterprises in Taiwan. In this way, enterprises set up under the legislation would be able to include the term “Benefit Corporation” in their names and hence, serve as a positive identifier to clients, investors and the public at large.
As such, the Committee’s proposed amendments to the Act (the “Committee Draft”) included a “benefit corporation” entity type and further provided that:
- benefit corporations had to expressly include as their purpose a “general social interest” and then state the specific social interest the company would serve (e.g. provision of goods or services to individuals and/or communities in need; environmental protection; improve the overall health of people);
- in making decisions and managing benefit corporations, the responsible persons (directors, officers, managers) besides the interests of the shareholders, may also take into account the interests of the company’s employees, clients and community; the environment at large; long-term sustainable development of the company;
- benefit corporations may also designate a “benefit” director or manager to design and put into practice a corporate governance structure unique to a benefit corporation; and
- the boards of benefit corporations must also prepare and disclose a report where it assesses the impact of its social interest activities on its stakeholders (with regards to how the report should be prepared and disclosed, the Committee left it to the MOEA to discuss and determine).
It is important to note that pursuant to the Committee Draft, the social interest purpose of a benefit corporation is the “pursuit” of said social interest; hence, the responsible person of a benefit corporation is not legally liable to any individual or organization who is the beneficiary of the social interest activities conducted by the benefit corporation. Further, the Committee Draft did not provide for any special tax considerations applicable to benefit corporations.
Despite the expression of support from a number of members of the committee, the draft amendment to the Act published by the MOEA (the “MOEA Draft”) in April this year did not include a chapter to allow for the formation of benefit corporation entities. The MOEA Draft only went as far as expanding the general scope of a company’s purpose from merely profit-making to serving the public’s interest. Although the MOEA Draft did not include a specific benefit corporation chapter, supporters are still optimistic and hopeful that some progress on this issue will be made. The next step is for the MOEA Draft to be reviewed, revised and approved by the Executive Yuan followed by debate and further revisions at the Legislative Yuan. Therefore, supporters believe there is still an opportunity for a benefit corporation chapter to be included in the Act at either the Executive Yuan or Legislative Yuan stages. As of November 2017, the MOEA Draft is still under review at the Executive Yuan.