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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