Taiwan’s Legislative Yuan enacted a bill revising 10 articles of the Company Act and adding three others at the end of 2011. The bill imposed new duties on directors including shadow directors.
Of particular note is Article 8 which now makes shadow directors liable for breaches of the fiduciary duties of a director. A shadow director is a person who without holding a directorship at a public company in fact performs the duties of a director or exercises actual control over the company’s personnel, finances, or business by instructing the directors. Like registered directors, these shadow directors are now subject to civil, criminal, and administrative liability. An exception however is carved out for government officers who may act as shadow directors and instruct directors representing government equity without liability.
In its comments to Article 8, the Legislature states that it extended the liability of directors to include shadow directors because it wanted the courts, law enforcement, and government agencies to determine the identity of directors by inquiring into who substantively acts as a director rather than who is formally registered as a director in name.
Article 23 of the revised Company Act allows the shareholders of a company to claw back any undue enrichment that accrues to a director or another fiduciary who breaches his duty of loyalty to the company. The shareholders must exercise their clawback right within one year though.
Directors are now also required to disclose any conflicts of interest pertaining to matters decided at a board meeting (Article 206). If a director fails to disclose a conflict of interest in board resolution, that resolution is void.
The Ministry of Justice’s comprehensive database of Taiwanese laws has an English translation of the current Act.