TAIWAN Law and Practice Contributed by: Susan Lo, Chi Lee and Evelyn Shih, Lee and Li Attorneys-at-Law
of the American Arbitration Association may be pre - ferred in JVs involving US parties. The choice of venue typically reflects the nationality and commercial inter - ests of the JV participants. Failure to agree on forum and arbitral rules can result in jurisdictional uncertainty, increased litigation risk and potential delays in enforcement. In such cases, the rules of the arbitration association, which may not align with the parties’ commercial expectations or the nature of the JV, may apply. It is therefore essential to clearly specify both substantive and procedural law in the JV agreement to avoid ambiguity and ensure predictability. Taiwan does not mandate ADR procedures for com - mercial disputes. However, arbitration and mediation are widely accepted and often encouraged, particu - larly in JV and contractual disputes. Parties are free to designate arbitration institutions and rules in their agreements, and Taiwan courts generally uphold such clauses. Taiwan is not a signatory to the New York Convention or other major international treaties on dispute resolu - tion due to its unique international status. Nonethe - less, Taiwan has developed a robust domestic legal framework for recognising and enforcing foreign arbi - tral awards under the Arbitration Act of Taiwan, pro - vided the award satisfies reciprocity and procedural fairness standards. Foreign court judgments may be enforced in Taiwan under the Code of Civil Procedure of Taiwan, subject to conditions including reciprocity, finality, and con - sistency with public policy. Foreign arbitral awards may also be enforceable through Taiwan’s courts, provided they meet the statutory requirements and do not conflict with public order or good morals.
execution of the pre-arrangement with respect to the number of seats on the board. Depending on the corporate structure and its pur - pose, the parties can include a provision regarding weighted voting rights in different classes of shares in their agreements. For closed-end companies, Article 356-9 of the Company Act stipulates that sharehold - ers can freely reach a voting or voting trust agreement. In addition, according to Article 10 of the Business Mergers and Acquisitions Act (BMAA), the sharehold - ers can reach a voting agreement for the purpose of M&A as well. However, beyond these two scenarios, the courts hold diverse views on whether shareholders or stakeholders can reach a valid voting agreement, as a voting agreement may affect the implementa - tion of corporate governance. For example, in 2022, the Supreme Court ruled that the voting agreement under which shareholders are obliged to vote for the director and supervisor candidates proposed by the outgoing (selling) shareholder for the target company, to guarantee payment of the share purchase price in instalments, was unenforceable because the agree - ment violated the principle of corporate governance and public customs (Supreme Court Civil Judgment 109-Tai-Shang-Zi No 2482 (2022)). 7.2 Duties and Functions of JV Boards and Directors Article 23 of the Company Act generally requires a director to maintain loyalty to the company and exer - cise the due care of a good administrator in conduct - ing the business operations of the company. It is therefore generally understood that the director holds a duty of loyalty and a duty of care to the company, as recognised in a recent court judgment in Taiwan (Supreme Court Civil Judgment 110-Tai-Shang-Zi No 117 (2021)). Separately, when the JV participant is a legal person, it can appoint an individual to serve as a director of the JV company under the “mandate relationship” according to the Company Act and the Civil Code. Consequently, the appointee bears a duty of care and a duty of loyalty to both the JV company and the JV participant. Under the Company Act, directors are subject to cer - tain restrictions on voting on matters with conflicts of interest (see 7.3 Conflicts of Interest ). Furthermore,
7. The JV Board 7.1 Board Structure
The board of directors is usually elected by the par - ticipants through cumulative voting. In some cases, the participants will add a voting agreement to ensure
187 CHAMBERS.COM
Powered by FlippingBook