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Mainland China, Hong Kong, Japan and Taiwan have run the ruler over legislation, streamlining clunky laws to improve frameworks on company Management

Overview of China’s governance mechanisms

For many years, mainland China had multiple corporate governance frameworks for foreign-invested enterprises. For example, a Sino-foreign joint venture did not have a shareholders’ meeting as its highest authority, while its board of directors was.

In 2019, the National People’s Congress promulgated the new Foreign Investment Law, which formally grants foreign investors national treatment, except in certain heavily regulated industries such as the financial sector. Since then, China had begun its five-year transition period, ending in 2024, to unify corporate structures for all types of corporations.

This article provides a concise overview of the unified corporate governance structure adopted since then.

Overview

The limited liability company and the joint stock company are the two basic corporate forms in China. Normally, private companies (including private Sino-foreign joint ventures and wholly foreign-owned enterprises) take the form of limited liability companies, while public companies and companies preparing to go public take the form of joint stock companies.

Under the latest PRC Company Law (as amended in 2023 and becoming effective on 1 July 2024), there are many differences between a limited liability company and a joint stock company. To name a few significant ones, a joint stock company is permitted to have preferred shares in addition to ordinary shares, which is one of the most notable developments adopted by the 2023 amendment, while a limited liability company can only have one class of share capital, which precisely refers to the “registered capital” concept under PRC law. A joint stock company has more lenient default share transfer restrictions under the PRC Company Law, while a limited liability company has relatively stricter default share transfer restrictions, which may be contracted out if the documentation is well drafted.

Despite these many differences, not to mention that a public company is also subject to the rules of stock exchanges, their basic corporate governance structures are similar, with three common corporate governance bodies: the shareholders meeting, the board of directors (or sole director, board) and the board of supervisors (or sole supervisor). Below is a brief introduction to each corporate governance body of a limited liability company.

Additional statutory corporate governance requirements are applicable to state-owned enterprises (SOEs) or enterprises in specially regulated sectors.

Shareholders meeting

The shareholders meeting of a Chinese company is composed of all shareholders and is its authoritative body with the power and authority to decide on all fundamental matters of the company. These include the increase or decrease of its registered capital, amendment to its articles of association (the charter documents of a Chinese company), election and replacement of directors and supervisors and determination on their remuneration, consolidation or spin-off or dissolution of the company or change of the corporate form (for example, changing from a limited liability company into a joint stock company for listing purposes).

The PRC Company Law lists eight default matters that are reviewed and approved by the shareholders meeting, among which, in our view and based on observations of the local practice of the companies’ registrar, the shareholders meeting may not delegate these default matters to the board for approval unless expressly permitted by the PRC Company Law. The PRC Company Law only expressly permits the shareholders meeting to delegate to the board the approval of a corporate bond issuance. On the other hand, a company may expand the authority of its shareholders meeting as long as the additional matters are expressly provided for under its articles of association.

In terms of voting, as a limited liability company does not have shares, its shareholders vote based on their shareholding percentages (calculated based on the registered capital a shareholder subscribed or paid and the total registered capital of the company) at a meeting or through written resolutions in lieu of a meeting.

Most matters can be approved by shareholders holding more than 50% of the voting power, and the following matters have to be approved by shareholders holding at least two-thirds of the voting power: increase or decrease of registered capital, amendment to its articles of association, consolidation, merger or spin-off or dissolution of the company, or change of the corporate form. Nevertheless, any resolution passed by written resolutions must be signed by all shareholders.

Shareholders are permitted to agree on specially tailored decision-making mechanisms if these do not violate mandatory rules of PRC law. It is common for a strategic investor to ask for a comprehensive veto at the shareholders or board level, and for a financial minority investor to seek “negative control” under the shareholders agreement and the articles of association of their investee companies.

When considering additional arrangements beyond the default rules in the PRC Company Law, a comprehensive assessment should be conducted in advance. For example, whether the “negative control” would trigger a merger filing in China, which applies to greenfield joint ventures, equity and assets acquisitions, and contractual control.

Board of directors

A Chinese company normally has a board consisting of at least three directors. However, if the company has few shareholders or is small, it may choose to have a sole director instead of a board. It is the shareholders meeting’s authority and power to elect and replace the directors (other than an employee-representative director), but it is practical for shareholders to enter into contractual arrangements regarding directors’ designation and nomination. The employee-representative director is not new and has been widely implemented in SOEs, but the 2023 amendment emphasises this together with other provisions regarding employees’ democratic management in non-SOEs.

An employee-representative director is the representative, directly or indirectly, elected by the employees of the company to hold the director’s office. The new PRC Company Law has complex rules on whether an employee-representative director may be waived.

The board reports to the shareholders and is responsible for convening and presiding over shareholders’ meetings and implementing their resolutions. The board is also the executive body of the company that decides on nine default matters as provided by the PRC Company Law, such as the business plan and investment plan, and the engagement and dismissal of the general manager of the company.

Similar to the authority of the shareholders meeting, the company has the flexibility to grant the board more authority by specifying this in its articles of association, provided that the statutory power of the shareholders meeting may not be delegated to the board unless otherwise expressly permitted by the PRC Company Law.

In terms of voting, each director has one vote, and the chairman does not have any casting vote. The board makes its decision by a simple majority, while if the board decides through written resolutions in lieu of a board meeting, the written resolutions shall be signed by all directors.

The directors owe fiduciary duties and duties of care to the company they serve. The 2023 amendment to the PRC Company Law also strengthened these obligations by incorporating more detailed requirements on self-dealing, corporate opportunities, non-compete, etc., and detailed penalties for breaching these duties.

The board may establish one or more specialised committees under it, such as an audit committee and a compensation committee.

Board of supervisors

Supervisor is a unique concept, serving the function of a “watchdog” for shareholders. Under the new PRC Company Law, a company may have a sole supervisor, or a board of supervisors consisting of at least three supervisors, and at least one-third of the supervisors shall be elected by employees. Previously, a company could have two supervisors, each appointed or nominated by its shareholders, which was the most common structure for a Sino-foreign joint venture.

Supervisors may request a shareholders’ meeting and submit proposals. They also have the power to supervise the directors and senior officers, and even bring a lawsuit against directors and senior officers under certain circumstances.

However, there is a trend for the board to set up an audit committee to replace the board of supervisors.

In general, the 2023 amendment to the PRC Company Law optimises Chinese companies’ corporate governance and also signifies other trends, such as enhancing employees’ participation in corporate democratic management and encouraging Chinese companies to attend to environmental, social and governance matters.

It is recommended to seek assistance in navigating these new trends.

JunHe
20/F, China Resources Building,
8 Jianguomenbei Avenue,
Beijing 100005, P. R. China
Tel: +86 10 8519 1300
Email: junhebj@junhe.com

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Updates to Hong Kong’s Corporate Governance Code

Corporate governance is the framework of rules, policies and practices that guide how a company is directed and controlled. For listed companies, strong corporate governance is not just a regulatory requirement but a critical factor in ensuring long-term sustainability, investor confidence and operational efficiency.

The Stock Exchange of Hong Kong (SEHK) has recently updated and amended the Corporate Governance Code (CG Code) and the related Rules Governing the Listing of Securities (Listing Rules). The changes take effect on 1 July 2025, and will apply to corporate governance reports and annual reports for financial years starting from 1 July 2025. Transitional arrangements for the caps on overboarding and the tenure of an independent non-executive director (INED) are given below. These changes aim to enhance transparency, accountability and sustainability among listed companies in Hong Kong. The amendments align with global best practices and respond to investor demands for stronger governance frameworks.

The following section highlights several key changes to the CG Code and the related Listing Rules:

Board accountability

Lead INED: Under the CG Code’s recommended best practice, where the chairman of the board is not an INED, the listed issuer will be required to designate an INED as a lead INED (Lead INED) to serve as an intermediary for the other directors and shareholders, and act as an alternative communication channel in case of inadequate communication with the chairman and management. Disclosure of the Lead INED’s role (if one is designated) is mandatory. The Lead INED, along with all other directors, will have the same fiduciary duties and the same level of liability. The implementation of a Lead INED will strengthen and facilitate communication between directors, and among directors and investors.

Engagement with shareholders: Issuers must enhance disclosures on the board’s engagement with shareholders in its CG report, such as the nature and frequency of engagement, the shareholders and company’s representatives involved and follow-up approaches.

Mandatory director training: Directors of Hong Kong-listed issuers will be required to receive annual continuous professional development training on topics such as directors’ responsibilities and issuers’ obligations, key legal and regulatory developments, corporate governance, environmental, social and governance (ESG), risk management and internal controls, and industry-specific developments and updates. The issuer will need to disclose in its CG report each director’s number of hours of training (without any minimum number of training hours); the topics; the means of training (i.e., physical or online); and the name of the training provider. First-time directors who have not served as directors of Hong Kong-listed issuers for the three years before their appointment must complete at least 24 hours of training within 18 months. Those with relevant prior experience will need to complete 12 hours of training within 18 months of their appointment.

Board performance review: Hong Kong-listed issuers should conduct a formal evaluation of board performance every two years. They must disclose key findings in the CG report. Issuers must also disclose:

1. 1. The board’s existing skills matrix;
   2. How the combination of skills, experience and diversity of directors serves the company’s purposes, values, strategy and desired culture; and
   3. Details and plans to acquire further skills. It is not sufficient to simply list the directors’ qualifications and experience. The performance review and skills matrix will help the board identify any gaps in skills or expertise, and ensure the board’s composition aligns with evolving business challenges.

Overboarding INEDS: Each INED can only serve as a director for up to six Hong Kong-listed companies concurrently (this hard cap will apply to existing listed companies from the first annual general meeting held on or after 1 July 2028). The nomination committee must assess and disclose in the CG report each director’s time commitment and contribution annually. This limit ensures INEDs can dedicate sufficient time to each board role, and directors must demonstrate meaningful engagement with each company’s affairs.

INED tenure: Any INED serving for nine consecutive years will automatically lose their independent status. The strict nine-year cap on INED tenure ensures the board will be regularly exposed to fresh perspectives, and reinforces INEDs’ roles as an objective check-and-balance mechanism. To continue board service, the INED must either be re-designated as a non-executive director (NED), or step down and undergo a three-year cooling-off period before potentially returning as an INED. This allows experienced directors to remain as NEDs while maintaining board knowledge and the three-year cooling-off period is intended to preserve true independence for those returning as INEDs. The CG report must include the tenure length of each director. By the first annual general meeting held on or after 1 July 2028, Hong Kong-listed issuers must ensure that long-serving INEDs do not constitute the majority of the INEDs on its board. By the first annual general meeting held on or after 1 July 2031, it must no longer have any long-serving INEDs.

Diversity and inclusion

Gender diversity: Hong Kong-listed issuers will be required to include at least one director of a different gender in the nomination committee. As the nomination committee plays a pivotal role in shaping board composition, a gender-diverse nomination committee is more likely to consider a broader range of candidates for board appointments and drive meaningful progress towards overall board diversity.

Diversity policy: The board is required to annually review the implementation of its board diversity policy. In addition, a diversity policy must also be adopted and implemented for the issuer’s workforce (including senior management). The gender ratio of senior management and of the workforce shall be separately disclosed in the CG report.

Risk management

Risk management and internal controls: The board must conduct annual reviews of its risk management and internal control systems. The review should cover all material controls, including financial, operational and compliance. The annual review need not be conducted externally and can be done in a format that fits the issuer’s circumstances.

The issuer will be required to make detailed disclosures in its CG report, including:

1. 1. A board statement acknowledging its responsibility for its risk management and internal control systems and a statement confirming these systems are appropriate and effective;
   2. The main features of the risk management and internal control systems in place (including the process used to identify, evaluate and manage significant risks, and the procedures for ensuring timely and accurate disclosures);
   3. Significant changes in the assessment of risks, and the risk management and internal control systems;
   4. Whether it has an internal audit function;
   5. The responsibilities of internal departments and external providers for the review;
   6. The review process of the risk management and internal control systems, and the frequency of reviews;
   7. The scope of the review; and
   8. The results and details of any significant control failings or weaknesses identified during the review and/or previously reported but remain unresolved, and any remedial steps taken or proposed.

The above-mentioned disclosures must include confirmation from the board, the relevant board committee(s), other internal control departments, the issuer’s independent auditors, and/or other external service providers that the issuer’s risk management and internal control systems are appropriate and effective.

Shareholder engagement

Dividend policy: Issuers with a dividend policy must disclose details of such policy in the CG report. Issuers must confirm that dividend decisions made by the board are aligned with the dividend policy. Issuers without a dividend policy must declare this fact and explain the reasons for its absence. Additionally, where a dividend is declared during the year, the issuer should disclose the reasons for any material variation in the dividend rate compared to that for the previous corresponding period. If the board decides not to declare any dividend, the issuer should disclose the reasons and how it plans to improve investor returns in the future.

In conclusion, the SEHK’s updated corporate governance rules signal a shift towards greater accountability, sustainability and investor protection. While the changes may increase short-term compliance burdens, they position Hong Kong as a leading market for responsible and transparent corporate governance. Listed issuers should take the opportunity to leverage these regulatory changes to strengthen their corporate governance frameworks to drive sustainable and long-term growth.

JINGTIAN & GONGCHENG
Suites 3203-3207, 32nd Floor, Edinburgh Tower,
The Landmark, 15 Queen’s Road Central,
Central Hong Kong
Tel: +852 2926 9300
Email: jingtianhk@jingtian.com

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Japan’s reforms in governance legislation

On 7 June 2024, the Financial Services Agency of Japan released the Action Programme for Corporate Governance Reform 2024: Principles into Practice. In the action programme, the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code presented a set of recommendations aimed at promoting the practical implementation of corporate governance reform.

These recommendations are grounded in a reaffirmation of the fundamental objectives of corporate governance, namely, the sustainable growth of companies and the enhancement of corporate value over the medium to long term. By evaluating and sharing specific measures taken by individual companies, the Council of Experts seeks to encourage voluntary, autonomous shifts in mindset among companies and investors, and move towards an improvement in corporate governance practices.

This regulatory initiative is driven by several factors, including the growing presence of foreign investors in Japan’s capital markets, which results in increased demand for enhanced disclosure practices. At the same time, shareholder activism has intensified, with adequately funded activist investors making proposals as shareholders of companies with high market capitalisation.

These activist investors have raised issues related to corporate strategy and operational challenges, thereby exerting pressure on companies to improve their corporate governance practices. In light of these developments, there is strong demand for the establishment of a more transparent and fair investment environment.

The following section summarises key corporate governance reform initiatives, including those within the Financial Services Agency of Japan’s action programme, which take recent trends in this sector into account.

TOB regulations

The current version of the Financial Instruments and Exchange Act requires that certain share acquisitions of listed companies must be conducted through a takeover bid (TOB) process. These processes include:

1. 1. When an acquirer purchases shares from more than 10 shareholders within a 60-day period through off-market transactions, and the acquirer’s shareholding percentage exceeds 5% as a result of the acquisition(s); or
   2. When an acquirer’s shareholding ratio exceeds one-third as a result of either off-market or on-market (off-floor trading) transactions (one-third rule).

Under the Act Partially Amending the Financial Instruments and Exchange Act and the Act on Investment Trusts and Investment Corporations, which was promulgated on 15 May 2024, companies must adhere to the following:

1. 1. The threshold for a TOB in the one-third rule will be lowered to 30%; and
   2. This new threshold also will apply to on-market (floor trading) transactions. As a result, in principle, any acquisition resulting in a shareholding percentage in excess of 30% must be conducted via a TOB.

These amendments are intended to ensure and increase the transparency and fairness of securities transactions that may affect corporate control or related matters within a company, by referring to thresholds and other aspects of TOB regulations in other jurisdictions. The effective date of the amendment will be specified by cabinet order and will be within two years of the date of promulgation of the amendment.

Disclosures

Disclosure of listed subsidiaries. Investors have pointed out that although the protection of minority shareholders and transparency in group governance are essential elements of investment decision making, existing disclosures about listed subsidiaries and equity-method affiliates of many listed companies are not sufficient for this purpose.

In response, the Tokyo Stock Exchange (TSE) published in December 2023 guidance targeting listed companies in parent-subsidiary relationships or equity-method affiliate relationships. The guidance addresses recommended disclosure items and key points to be described in corporate governance reports to improve the comparability of corporate governance information of listed companies for investors, including:

1. 1. The company’s approach to and policies on group governance;
   2. The rationale for maintaining listed subsidiaries;
   3. Measures to ensure effective governance of those subsidiaries; and
   4. Policies and initiatives to ensure the independence of those subsidiaries from the parent company for the protection of minority shareholders.

The TSE also announced that it encourages listed companies to start disclosing this information in their corporate governance reports.

In February 2025, the TSE also published The Investor’s Perspective on Such Matters as Parent-Subsidiary Listings, which reflects feedback from both Japanese and foreign investors. The TSE encourages listed companies to engage in dialogue and improve transparency on issues related to group governance and the protection of minority shareholders.

Disclosure of material agreements and cross-shareholding. The Cabinet Office Ordinance on Disclosure of Corporate Affairs and the Cabinet Office Order on Disclosure of Information on Regulated Securities were amended to require, in principle, that annual securities reports for fiscal years ending on or after 31 March 2025 include disclosures of “material agreements, etc.” and cross-shareholding.

The amendment clarifies the scope of required disclosures of “material agreements, etc.”, in response to concerns that disclosure standards in Japan are insufficient compared with those in other jurisdictions with similar frameworks. The revised rules clarify that annual securities reports and other disclosure documents should include the following three categories of “material agreements, etc.”:

1. 1. Agreements between a company and its shareholders on corporate governance matters;
   2. Agreements between a company and its shareholders on the disposal or acquisition of shares held by those shareholders; and
   3. Financial covenants.

Listed companies are also now required to disclose detailed information about cross-shareholding (shares held not for purely investment purposes but for strategic reasons, such as maintaining business relationships or as a defence against takeovers) for which the holding purpose changed from “cross-shareholding” to “pure investment” during the past five fiscal years. This requirement reflects concerns that some companies change the purpose of holding from “cross-shareholding” to “pure investment”, even though they effectively are holding shares for cross-shareholding purposes.

Required additional disclosures include the name of the issuer, number of shares held, balance sheet valuation, fiscal year in which the change to the holding purpose occurred, reasons for the change, and the policy on whether the shares will be retained or sold thereafter. As corporate governance reports must also include the company’s cross-shareholding policy, similar disclosures are expected there as well.

Disclosure of engagement with shareholders. In recognition of the growing importance of constructive dialogue between companies and investors for improving corporate management, as of March 2023, the TSE requires all companies listed on the prime market to disclose information about their management’s shareholder engagement activities during the preceding fiscal year.

Companies listed on the prime market are expected to disclose the following information (although no specific disclosure documents are designated for this information):

1. 1. Individuals primarily responsible for engagement with shareholders;
   2. Overview of the shareholders engaged in the dialogues;
   3. Areas of responsibility of the company staff who were in charge of the engagement;
   4. Key topics discussed and concerns raised by shareholders;
   5. How shareholder feedback was communicated to management and the board of directors; and
   6. Any measures taken in response to shareholder feedback.

Sustainability and ESG

Gender diversity. Annual securities reports for fiscal years ending on or after 31 March 2023 must include a new “sustainability information” section, which mandates the disclosure of diversity indicators such as the ratio of female managers and the gender pay gap.

In line with The Intensive Policy on Gender Equality and Empowerment of Women 2023, published by the Gender Equality Bureau of the Cabinet Office on 13 June 2023, the TSE amended its listing rules in October 2023 for companies listed on the prime market and introduced the following targets:

1. 1. Companies should strive to appoint at least one female officer by around 2025;
   2. Companies should attempt to increase the percentage of female officers to 30% or more by 2030; and
   3. A recommendation that companies formulate and disclose action plans to achieve these targets.

Climate change. In March 2025, the Sustainability Standards Board of Japan, an internal body of the Financial Accounting Standards Foundation, issued Japan’s first sustainability disclosure standards. These include:

1. 1. The application of the sustainability disclosure standards;
   2. General disclosures; and
   3. Climate-related disclosures.

These standards are designed to be internationally consistent and were developed with reference to the IFRS Sustainability Disclosure Standards. They are intended to be implemented in stages, beginning with large companies listed on the prime market of the TSE with significant market capitalisation. This applies particularly to those that prioritise constructive dialogue with global investors for the financial years ending on or after 31 March 2026.

Corporate governance reports are also expected to develop climate-related disclosures in increasing detail.

NISHIMURA & ASAHI (GAIKOKUHO KYODO JIGYO)
Otemon Tower, 1-1-2 Otemachi, Chiyoda-ku
Tokyo 100-8124, Japan
Tel: +81 3 6250 6200
Email: t.ueshima@nishimura.com

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Taiwan aligns governance laws with global benchmarks

Taiwan’s Company Act establishes the fundamental corporate governance framework for all companies, covering incorporation, management, fiduciary duties, shareholder rights and more. For public companies, the Securities and Exchange Act (SEA) – together with rules announced by the Financial Supervisory Commission (FSC), the Taiwan Stock Exchange (TWSE) and the Taipei Exchange (TPEx) – imposes more stringent governance standards to ensure transparency, protect investors and strengthen accountability. Among others, the TWSE and TPEx have jointly adopted the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, which provide structural recommendations.

In addition, Taiwan has introduced reforms, including the corporate governance officer (CGO) role, mandatory sustainability reporting and other disclosures. These changes reflect Taiwan’s commitment to aligning with global trends and market expectations while tailoring reforms to its domestic corporate environment. The following are key features of recent developments.

Corporate forms

Common corporate forms in Taiwan are the limited liability company (LLC) and the company limited by shares. An LLC is for small and mid-sized businesses or individual founders, with liability limited to capital contributed. A company limited by shares is for medium-to-large or foreign enterprises, as it enables capital-raising through share issuances and limits shareholder liability to their subscribed capital. Taiwan introduced the “closely held company limited by shares” (CHC) in 2015. A CHC is a sub-type of a company limited by shares with no more than 50 shareholders and must restrict stock transfers in its articles of incorporation (AOI). CHCs enjoy flexibility in capital formation and governance, and are attractive for investors who prioritise control and stability among shareholders.

Director qualifications

For private companies, there are no statutory qualifications for directors, except for basic disqualification criteria such as bankruptcy records, dishonoured bills, or specific criminal convictions (mostly financial crimes). There is no nationality or residency requirement except that a PRC individual can only serve as director of an approved PRC-invested company.

Listed companies must appoint at least two independent directors, who comprise no less than one-fifth of the board.

Independent directors must not have close personal, financial or employment ties with the company (or its affiliates) within two years prior to their appointment and during their tenure. They must also have at least five years’ professional experience in fields such as business, law, finance, or accounting. These requirements ensure a baseline of competence and objectivity in board decisions.

Directors’ fiduciary duties

Under the Company Act, directors have fiduciary duties, including duty of loyalty and duty of care. Duty of loyalty prohibits directors from engaging in self-dealing or competitive activities without prior disclosure and shareholder approval. The duty of care requires directors to act with the diligence of a “good administrator”, complying with laws, the AOI and shareholder resolutions.

Where conflicts of interest arise, directors must disclose all relevant facts and abstain from voting if such concerns would be prejudicial to the company’s interests. In competitive transactions, prior shareholder approval is required, and any undisclosed gains may be recovered by a resolution within one year.

If a director enters a self-interested transaction, the company must be represented by a disinterested supervisor or audit committee member. These requirements reinforce the directors’ obligations to act in the company’s best interests.

Shareholders’ agreement

Under the Company Act, the board has authority over daily operations and business decisions. However, key decisions fundamentally affecting the company – such as AOI amendments, mergers, spin-offs, capital reductions, sales of all or substantially all assets and winding up – are reserved for shareholders’ approval.

Although shareholders may want stricter approval thresholds for other critical decisions, the AOI cannot impose enhanced thresholds except for matters permitted under the Company Act. To address this limitation, shareholders often reach agreements that include “reserved matters” clauses requiring prior consensus on key operational or financial issues. A corporate action complying with statutory requirements but breaching an agreement remains valid and enforceable, and aggrieved shareholders may only seek contractual remedies such as damages.

Voting agreements

Before 2018, the legality and enforceability of a shareholders’ agreement was questionable under Taiwan law. However, the Company Act amendment in 2018 stipulates allowing written voting agreements among shareholders of private companies to co-ordinate strategies and consolidate influence. These agreements may cover matters such as director elections or support for key resolutions.

Shareholders may also establish voting trusts and appoint a trustee to exercise rights on their behalf. These voting trusts must be registered with the company at least 30 days prior to the annual general meeting or at least 15 days before an extraordinary meeting. The registration should include shareholder and trustee details, the number of shares entrusted, and other relevant information.

Voting agreements and trusts are prohibited in public companies due to the risks of minority oppression. Even for private entities, agreements violating public order, good morals, or governance principles (e.g., those without clear durations, or suppress minority rights) may be deemed invalid by courts.

Disclosure requirements

Private companies in Taiwan are not required to publicly disclose their financial statements. However, basic corporate information such as registered address, business scope, company status, list of directors and capital amount is publicly accessible through the corporate registry’s website. Material changes such as director appointments, capital changes, and AOI amendments, must be reported to the corporate registration authority within 15 days.

Public companies have comprehensive disclosure obligations under the SEA and FSC regulations. Disclosures must be made via the TWSE-managed online platform Market Observation Post System.

For example, public companies must submit quarterly financial statements, audited annual reports and monthly revenue figures. Annual reports must disclose the top 10 shareholders and, if the company has a corporate director, the shareholder structure behind that corporate director. To align with international practice, from 2023, listed companies as well as over-the-counter companies with paid-in capital of NTD600 million (USD20 million) or more must provide English versions of their shareholders’ meeting manuals, annual reports and financial statements.

Additionally, public companies must report events that could impact share value, such as changes in executive officers, mergers, significant transactions, or changes in external auditors, within two days of occurrence.

To strengthen transparency in equity ownership, the SEA requires any shareholder who acquires 5% or more of a public company’s shares to report it to the FSC and make a public announcement. This threshold, previously set at 10%, was lowered in May 2024. In addition, if a shareholder increases or decreases their holdings by an amount equal to 1% of the company’s total issued shares, resulting in a corresponding ownership percentage change of at least 1%, the shareholder must also submit an FSC report.

On regular filing obligations, directors, supervisors, management and major shareholders holding at least 10% of a public company’s shares must report these changes to the company monthly, which then files the data with the FSC.

Sustainability report

To promote ESG practices, the FSC, through its Sustainable Development Action Plans 3.0, has adopted reporting requirements based on the Sustainability Accounting Standards Board framework and the Task Force on Climate-related Financial Disclosures.

From 2025, all listed companies in Taiwan (regardless of capital size) must publish annual sustainability reports by 31 August, outlining industry-specific ESG risks, performance indicators and climate-related disclosures, in line with Global Reporting Initiative standards.

Companies must indicate whether a third party has verified the content. The TWSE digtal platform supports data collection and standardisation, improving transparency across listed companies.

Corporate governance officer

As of 30 June 2023, all listed companies in Taiwan must appoint a CGO, who is responsible for ensuring compliance with governance laws and best practices, and supports directors in performing their duties. This includes organising board and committee meetings, preparing meeting notices, agendas and minutes, and ensuring that meeting procedures comply with legal and regulatory requirements.

In addition, the CGO has an important advisory role when onboarding new directors. CGOs promptly inform them of legal and regulatory updates, ensuring they have accurate and accessible information essential for effective decision making. The CGO is expected to play an increasingly strategic role in strengthening board effectiveness and stakeholder trust.

In conclusion, Taiwan continues to enhance its corporate governance framework through the integration of clear statutory requirements with practical oversight tools. These legal reforms demonstrate a shift towards proactive governance, emphasising board professionalism, transparency and long-term sustainability. As Taiwan aligns its corporate governance standards more closely with international benchmarks, its legal and investment environment will become increasingly attractive to both domestic and global investors.

LEE AND LI, ATTORNEYS-AT-LAW
8F, No. 555, Section 4, Zhongxiao E. Road,
Taipei 11072, Taiwan, R.O.C.
Tel: +886 2 2763 8000
Email: attorneys@leeandli.com

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