Proposal to Introduce Closely Held Corporation in Taiwan

The Executive Yuan on April 30 finalized a proposed amendment to the Company Act to introduce what is known as a “closely held corporation.”  The purpose of the newly proposed regime seeks to encourage entrepreneurs at home and abroad to use Taiwan as a venue to incorporate their businesses, by giving more latitude in corporate finance matters. Pursuant to the proposal, a closely held corporation shall not have more than 50 shareholders and there shall be some certain share transfer restrictions to keep the company being closely held.  Several important features of the proposal include:-

• A closely held corporation shall be able to decide and distribute dividends on a half-year basis instead of a full-year basis, to strengthen frequency of shareholders investment returns.
• A closely held corporation shall be free to elect a no face value of their shares.
• The promoters of a closely held corporation shall be allowed to subscribe to the initial shares of the company in the form of not only cash but also property, technical knowhow, services and credit as required by the company to a certain percentage of the total shares to be issued.
• Shareholders meetings may be conducted by online video conferencing and shareholders resolutions may be voted by writing.  

It is believed by some that once these measures are passed into law by the Taiwan legislature, more and more entrepreneurs will consider to incorporate their businesses in Taiwan, including those who are routinely attracted to incroporating their businesses in offshore jurisdictions.