Taishin financial holdings filed a civil lawsuit against Chang Hwa Bank for the 24th directors’ election in 2014. The Taiwan High Court announced the judgment on May 17th ,2017. The Ministry of Finance values the following judgment which stated that the contractual relationship of "Ministry of Finance shall transfer the Chang Hwa Bank’s management right to Taishin financial holdings and the Chang Hwa Bank shall be led and managed by Taishin financial holdings” was overruled by Taiwan High Court in part of its judgment and the original judgment of Taipei district court which ruled that “Ministry of Finance shall not hinder the representatives who were appointed by Taishin financial holdings from being elected for the majority seats of the Chang Hwa Bank board while Taishin financial holdings remains as the largest shareholder of Chang Hwa bank” was an ultra petita ruling and shall be overruled. The Ministry of Finance deeply regrets that the Taiwan High Court confirms the existence of contractual relationship which stated that “The Ministry of Finance shall support the representatives who were appointed by Taishin financial holdings to be elected for the majority seats of the Chang Hwa Bank board while Taishin remains as the largest shareholder of Chang Hwa bank”.
The statements of Ministry of Finance are as follows:
Ministry of finance emphasized that there is no contractual relationship between Taishin financial holdings and the Ministry of Finance.
The Ministry of Finance stated that the news announcement on July 5th, 2005 and the official letter on July 21st, 2005 were the internal explanatory documents of policy, which did not imply any contractual relationship of shareholders agreement. In 2005, Chang Hwa bank issued private placement preferred shares with 3 years duration. According to the common knowledge of the then other potential investors, the support of the Ministry of Finance shall last the same period of time as the duration of the preferred shares. The support for being elected to the majority of seats on Chang Hwa Bank’s board is not permanent. Taishin financial holdings’ understanding was different from the other potential investors.
Even if the contractual relationship existed, the Ministry of Finance has already fulfilled its contractual obligation during the 21st board election. It’s confirmed by the verdict which overruled Taishin financial holdings’ appeal of requesting the Ministry of Finance to transfer the management rights.
Legislative Yuan stated the government-owned shares shall not support non government-owned shares.
According to resolution of Legislative Yuan , government-held shares cannot support the candidates who represent the non-government held shares. The Ministry of Finance shall not support the candidates of Taishin financial holdings since it is one of the administrative agency which is restrained by the resolution of Legislative Yuan. As for the shares solicited by pan government-held shares, the solicitor shall vote according to the proxy solicitation and the content of the advertisement without supporting other candidates.
CHB’s shareholder structure isn’t the same as before and it is obvious that there is no room for
CHB’s shareholder structure has changed significantly. A new key shareholder is going to participate in the 2017 election of board of director and nominate 2 candidates for director’s seats. Shall the new key shareholder secure 2 director’s seats while the Ministry of Finance can only secure 1 director’s seat, the Ministry of Finance shall not be able to support Taishin financial holdings to obtain the majority of seats for directors (i.e. 5 seats), considering CHB’s board structure is composed of 6 director’s seats and 3 independent director’s seats.
The number of the director’s seats requested by
In terms of CHB’s shareholder structure, Taishin financial holdings possess 22.5% of shares, which is much less than MOF’s shares (12.19%) plus other pan-governments owned shares. The content of judgment ruled that Taishin financial holdings shall obtain 5 director’s seats while MOF and other shareholders shall obtain only 1 director’s seat. It violates the principle of proportionality by limiting the Ministry of Finance and other shareholders to exercise their rights to fight for the director’s seats and it also violates the public interest and social expectation by constraining the shareholders to enforce the shareholders rights according to the law. Therefore, we regard it as an inappropriate judgment.
The Voting Agreement violates the shareholder’s equitable interests and rights
Chang Hwa Bank is a large financial institute and listed company which has nearly 200 thousand shareholders and belongs to the highly controlled sector and supervised by financial regulatory authorities. Company Act of ROC adopts Cumulative Voting rule to prevent major shareholders from manipulating the election of the board. The Court Judgment ruled that the Ministry of Finance shall continuously support the Agreement should be classified as a voting agreement which constrains the voting direction. It may seriously jeopardize the shareholders participation rights. The precedent of denied this kind of agreement while foreign law stipulated a term or a prohibition on this kind of agreement. Moreover, according to recent amending trends of the Company Act of ROC, the Voting Agreement is not applicable to listed companies. It is unfortunately that the Court judgment in this case ruled that the agreement is still valid by continuity until it is terminated; it differs from the foreign law opinion and the legislative intent to protect the shareholders’ equitable interests and rights of our Company Act.
Taishin financial holdings endeavored to merge Chang Hwa Bank four times before.
After Taishin financial holdings acquired majority seats of board of directors in 2005, it attempted to merge Chang Hwa Bank three times from 2006 to 2008 while possessing the management right of Chang Hwa Bank. Moreover, in 2013, Taishin financial holdings unilaterally declared that it has completed the merge with Chang Hwa Bank in Q3 2013. In order to maintain a reasonable management condition, a sound working environment and for the benefits of shareholders of Chang Hwa Bank, Ministry of Finance shall protects public assets by resisting the unreasonable terms of stock conversion and the intension to merge with Taishin financial holdings.
The Ministry of Finance will appeal the ruling
According to the Ministry of Finance, after receiving the judgment of Taiwan High Court, the Ministry of Finance will assign lawyers to analyze it in details and appeal to the Supreme Court to protect and secure government-held shareholders’ rights and interests.
The judgment will not affect the progress of election. MOF encourages that all of our friends and supporters should protect the right of the government -owned banks and the assets owned by the entire people.
CHB will hold the 25th of board of directors’ election on Jun 16th. MOF states that in order to protect people’s rights, pan government-owned shareholders has lawfully recommended the list of directors and approved by CHB board of directors’ meeting which includes 5 general director candidates and 3 independent director candidates. Since the government-owned shares in owned by the people, the government must exercise the due care of a prudent administrator. Moreover, the business performance has significantly improved since the reorganization of CHB management team. Therefore, MOF strongly encourages all the shareholders who recognize the MOF’s proposal to support MOF and pan government owned shares nominated candidates. In this way, the candidates recommended by government-owned shares can be elected successfully and make great contribution to all the shareholders, employees and the sustainable development of Chang Hwa Bank.