Audit committees are established for the purpose of conforming with international development trends and strengthening internal monitoring mechanisms for corporate governance in Taiwan. In addition, according to relevant international data, the higher the percentage of independent directors on the board of directors, the higher the degree of positive correlation between the establishment of independent directors and business performance; establishing independent directors also helps lower the probability of occurrence of irregular and unlawful events in the company. Hence the establishment of an audit committee has advantages such as enhancing shareholder equity and sound development of company operations.
The Financial Supervisory Commission, with the authorization under Article 14-4, paragraph 1 of the Securities and Exchange Act, has studied and drafted a plan as set out below for the scope of application for the mandatory establishment of an audit committee, taking into account the scale, type of operations, and other essential considerations with regard to companies. A notice of the draft regulations will be given in order to solicit outside opinions.
1.Scope of application: Pursuant to the provisions of Article 14-4 of the Securities and Exchange Act, a financial holding company, bank, bills finance company, insurance company, and any integrated securities firm that either is TWSE (or GTSM) listed or is a financial holding company subsidiary, and any TWSE (or GTSM) listed company outside the financial sector with paid-in capital of NT$50 billion or more, shall establish an audit committee in lieu of a supervisor. For an above-listed financial enterprise subsidiary whose issued shares are held entirely by the parent financial holding company, the financial holding company may choose to set up either an audit committee or a supervisor in the subsidiary company.
2.Transitional Measures: Pursuant to Article 181-2 of the Securities and Exchange Act, the requirement to establish an audit committee under the preceding point may be postponed until the expiration of the term currently being served by the directors or supervisors; if the term of the current directors and supervisors expires in 2013, the requirement may be postponed until the expiration of the term of the directors and supervisors elected in 2013.