Taiwan Now Recognizes a Close Corporation in its Company Act

October 11, 2015

In order to encourage the creation of new and creative businesses by entrepreneurs, the much talked about close corporation is now formalized in Taiwan's Company Act, seeking to provide diversity and flexibility in matters relating to share structures, financing and corporate governance.  The important features of a close corporation include:-


  • maximum number of shareholders is 50
  • articles of incorporation must have share transfer restrictions so that the company will not be issuing shares to the public
  • ability to decide and distribute dividends on a biannual instead of annual basis
  • ability to issue no shares with no par value
  • ability to issue special shares with multiple voting rights and veto rights
  • ability to issue new shares and bonds convertible to equity without reference to preemptive rights of existing shareholders
  • ability to have voting agreements including have the same entrusted to others
  • ability of the promoters of a close corporation to subscribe to the initial shares of the company by way of property, technical knowhow, services and credits in lieu of contributing cash, while these cash alternatives can be up to 25% of the total paid up capital if the capital is more than 30 million NT dollars and up to 50% if it is less
  • Shareholders meetings may be conducted by online video conferencing and shareholders resolutions may be voted by writing.  

Many believe the creation of close corporation under the Company Act will soften the roughness in regulations pertaining to capital requirements for startups and because the flexibility of the permissible share structures along with the varied voting rights, it will be attractive to talented entrepreneurs who may be young and have less financial resources, as well as investors and valuable employees.