In current practice, the appointment of an inspector during the procedures of a shareholders' meeting is rare.
In Taiwan’s Company Act, the provisions on inspectors are scattered across different chapters. For example, when minority shareholders request the board of directors to convene an extraordinary shareholders’ meeting, or convene it themselves with approval from the competent authority, they may appoint inspectors to investigate the company’s business and financial status (Article 173). The shareholders’ meeting may select and appoint inspectors as required to examine the statements and books prepared and submitted by the board of directors, as well as the auditing reports submitted by the supervisors (Article 184). Minority shareholders may apply to the court for the appointment of an inspector to inspect, within the necessary scope, the current status of the company’s business operations, financial accounts, property, particular items, documents, and records of a particular transaction of the company (Article 245). Inspectors may also be appointed by the court during corporate reorganization procedures (Articles 285, 285-1, 313), or by the shareholders’ meeting during liquidation procedures (Articles 331, 353). The purpose of this institutional design is to enforce shareholders’ information rights, mitigate the asymmetry between shareholders and company managers, and protect shareholders’ rights by entrusting independent, professional, and impartial third-party inspectors to investigate the company’s books, records, and operations. However, the scope of such an investigation is, in principle, primarily focused on the company’s business accounts and asset conditions. In practice, there are very few instances where an inspector is appointed solely for the purpose of holding a shareholder meeting. Consequently, in current corporate control disputes at shareholder meetings in Taiwan, a solution is often sought through judicial channels, such as both parties applying for provisional disposition beforehand or engaging in litigation over shareholder meeting resolutions afterward. At the time the shareholder meeting is held, aside from the potential presence of personnel from the Securities and Futures Investors Protection Center (SFIPC) to attend and speak, there is no other neutral third party to record the proceedings of the shareholder meeting objectively.
The Companies Act of Japan establishes a system for inspectors of shareholders' meetings.
Regarding disputes that may arise during the process of convening a shareholder meeting, Article 306, Paragraph 1 of the Japanese Companies Act clearly stipulates: “A company or a shareholder holding 1% or more of the total voting rights of all shareholders (for a public company, a shareholder holding continuously for six months or more (Paragraph 2 of the same Article); if the Articles of Incorporation provide for less stringent requirement, that provision shall prevail) may apply to the court for the appointment of a shareholder meeting inspector before the shareholder meeting, to investigate the procedures for convening the meeting and the methods of resolution.” The shareholder meeting inspector has two main functions in practice. The first is the violation deterrence function, which refers to preventing the procedures for convening the shareholder meeting or the methods of resolution from being conducted unlawfully or improperly, thereby preventing disputes that may arise after the meeting. The second is the evidence preservation function. If a dispute arises and leads to litigation over the convening procedures or resolution methods after the shareholder meeting, the inspector’s report can be used as evidence. Therefore, in Japanese practice, there are many instances where a company or shareholder applies to the court for the appointment of an inspector when a control dispute arises. This ensures that the shareholder meeting can be convened appropriately, conducted, and resolved in compliance with laws and regulations.
In practice, attorneys are predominantly appointed to serve as inspectors.
The documents required to apply for the appointment of an inspector include the company’s certificate of historical matters (similar to Taiwan’s company change registration form), the articles of incorporation, the shareholder register or documents capable of identifying the shareholder composition, and the notice of the shareholder meeting, among others. The application must be filed with the court of the district where the company’s head office is located (Article 868, Paragraph 1). In principle, unless there are clearly illegal circumstances, the court will grant the appointment if the applicant meets the formal requirements regarding shareholding. In practical operation, the court typically schedules a hearing to confirm whether the applicant meets the formal requirements and to discuss the inspector’s key investigative scope and approach for investigation. Although the Companies Act does not explicitly require specific qualifications for the inspector appointed by the court, practicing attorneys are predominantly selected in practice, especially those specializing in commercial law and shareholder meeting procedures.
The scope of an inspector's duties encompasses the convening procedures and methods of resolution of the shareholders' meeting.
Since the duty of the shareholder meeting inspector is to investigate the procedures for convening the shareholder meeting and the methods of resolution, the specific investigative matters can be further broken down according to the progress of the meeting. Common investigative items concerning the convening procedure include examining the board of directors’ resolution to convene the meeting, the content and dispatch method of the convening notice and meeting handbook, as well as any attachments, and the manner in which the company handled shareholder proposals, to determine whether the handling of these matters complies with legal requirements. Regarding the methods of resolution, the inspector examines aspects such as confirming the qualifications and shareholdings of attending shareholders, the content of proxies and the exercise of voting rights and the resulting vote count, the quorum of the shareholder meeting, whether the company fulfilled its duty to explain, the full video recording of the meeting proceedings, and the voting results. Furthermore, to ensure the smooth performance of the inspector’s duties, directors or corporate supervisors who obstruct the inspector’s investigation may be subject to a fine of up to 1,000,000 Japanese yen (Article 976, Paragraph 5).
After completing the inspection mentioned above, the inspector is legally obliged to produce a report and submit the investigation results to the court in writing or as an electronic record (Article 306, Paragraph 5). If the court deems it necessary, it may order the inspector to supplement or add to the report (Paragraph 6 of the same Article). In addition to providing a copy of the report to the company, if the inspector is appointed upon a shareholder’s application, a copy of the report must also be provided to the applicant shareholder (Paragraph 7 of the same Article). Typically, the inspector will include documents such as the convening notice, records of notice dispatch, minutes of the board of directors meeting, minutes of the shareholder meeting, and a verbatim transcript of the meeting audio file as attachments to the report submitted to the court.
Inspectors shall maintain neutrality and faithfully record the proceedings of the shareholders' meeting.
However, it is worth noting that the inspector is neither the person presiding over the shareholder meeting nor aligned with the applicant. Instead, the inspector serves as a neutral third party who faithfully records the convening procedure and its legality. Therefore, if the convener still takes unlawful or improper actions on the day of the shareholder meeting, the inspector will not intervene to stop them immediately. It means the possibility of shareholder rights being infringed cannot be completely ruled out. Nevertheless, because the inspector prepares a report afterward, detailing the entire convening process, the court will, in principle, rely on the inspector’s report to determine whether the proceedings were unlawful if subsequent litigation occurs. This mechanism still serves to some extent as a deterrent against intentional violations by the convener and as a function of evidence preservation.
Finally, regarding the inspector’s remuneration, the Companies Act stipulates that it shall be borne by the company (Article 306, Paragraph 4), including the necessary expenses for the investigation (Civil Code Articles 649, 650, 656). However, in practice, these costs are often prepaid by the applicant at the time of application and subsequently claimed from the company.
Our jurisdiction may consider this as a reference or a model for legislative reform.
Given that the corporate control disputes frequently seen in Taiwan’s practice are not limited to the shareholder meeting proceedings themselves, but start from various shareholder services operations, such as the board resolution before the meeting, the review of shareholder proposals, the dispatch and re-issuance of convening notices, the distribution of souvenirs, proxy solicitation, and tallying as well as validation of proxies. Disputes have previously occurred at every single stage; future consideration could be given to referencing Japan’s Companies Act inspector system. Expanding the duties and scope of investigation for the existing inspector system in Taiwan’s Company Act would likely help prevent unlawful conduct during shareholder meetings. Meanwhile, this can effectively preserve relevant evidence and achieve a greater effect in resolving disputes and restoring order.
