Taiwan's Cabinet Conducts Initial Review of Proposed Corporate Reorganization Law

The Executive Yuan of Taiwan conducted the first review of the draft Company Reorganization and Bankruptcy Act (“Act”) proposed by the Ministry of Economic Affairs (MOEA) on December 1, 2006. It is expected that the Act will have a great impact on the existing company reorganization proceedings. The Act proposes to set up special courts in the north, central and south of Taiwan exclusive for company reorganization, and the time period for the court to rule on company reorganization applications will be shortened from the existing 180 days to 90 days. Additionally, if the court decides to reject an application for commencement of the proceedings to consider a reorganization application, or to reject a reorganization plan put forth by the applicant, the court may declare the applicant bankrupt ex officio under the proposed Act. This arrangement can effectively prevent the practice that some companies repeatedly filed reorganization applications in order to stall creditors. Nonetheless, the Judicial Yuan recently also proposed a revised Bankruptcy Act, which has some inconsistent provisions toward the Act. The MOEA indicates that they will coordinate with the Judicial Yuan and integrate the two proposed drafts.