Article 43-1, Paragraph 1, of the Securities and Exchange Law as amended on January 29, 1988, stipulates that, “Any person who acquires, either individually or jointly with co-acquirers, more than ten percent of the total shares outstanding of a public company shall file a statement with the agency-in-charge within ten days after such acquisition, stating the purpose of acquisition, the sources of funds for the purchase of shares and any other matters required to be disclosed by the agency-in-charge; and such persons shall file timely amendments when there are changes in the matters reported.” Though it limits people’s autonomous right to information, this provision is enacted with a view to enhance public interests and is intended to elaborate the principle of complete public disclosure of information to ensure that major changes of corporate share-ownership are completely disclosed to the public in a timely manner, and to enable the agency-in-charge as well as the investing public to know the reasons for and parties involved in those major changes and to gain a better understanding of possible changes in corporate control and share prices. Since the term “co-acquirers” has more than one possible interpretation and since the statute itself is silent in this regard, in order to enforce the law to accomplish the abovementioned legislative intent, the agency-in-charge, taking the characteristics of our stock markets into account, may promulgate clear and concrete explanatory administrative rules to interpret it.
The Securities and Exchange Commission of the Ministry of Finance (later renamed the Securities and Futures Commission), which was the then agency-in-charge under Article 3 of the Securities and Exchange Law, promulgated the Guidelines on September 5, 1985 (later amended by the Securities and Futures Commission on October 31, 1998). The Guidelines are necessary explanatory administrative rules promulgated by the agency-in-charge based on its power and authority in order to effectively enforce the stipulation of Article 43-1, Paragraph 1, of the abovementioned law by way of elaborating the meanings and the scope of applications of the terms, “acquire shares”, “co-acquirers” and “methods of acquisition” used, to inform acquirers of securities when the filing obligations arise and to implement the management of major changes of share-ownership.
Though the Guidelines were promulgated due to practical necessity, their Article 3, Subparagraph 2, and the relevant part of Article 4 provide the definition of a term of the enabling statute that goes beyond its original statutory scope. Article 3, Subparagraph 2, of the Guidelines defines the term “co-acquirers” of Article 43-1, Paragraph 1, of the Securities and Exchange Law as “those who acquire shares through a company in which the person, his spouse, his minor child, and his relatives within the second degree of relationship together hold more than one third of the shares with voting right, or through a company in which the person, his spouse, his minor child, and his relatives within the second degree of relationship hold a half or more of the seats on the board of directors or supervisors, or through a company in which the person, his spouse, his minor child, or his relatives within the second degree of relationship serve(s) as its chairman or chief executive officer.” This definition reflects the agency’s effort to effectively disclose information to appropriately protect the rights and interests of investors. As a result, after taking into account the characteristic relationships of relatives in our corporate culture and the correlation between the relationship of relatives and share acquisition, the agency-in-charge defined the term “co-acquirers” utilizing objective relationships of relatives as standards and recognizing the necessity between the acquirer’s intent and collective behavior. This defining method may be sound for practical reasons, yet it neglects the fact that in general the term’s prefix, “co-”, represents agreements in principle between or among parties to achieve certain objectives (such as control, investment, etc.); therefore, co-acquirers can not be defined according to the necessity between the acquirer’s intent and collective behavior regardless of whether or not there are agreements in principle between or among acquirers. In our current society, it is common that specific relationships among relatives may influence or dictate family members’ share acquisitions; however, it is also difficult to deny the existence of exceptions. The definition views individual acquirers of shares as co-acquirers and imposes on them filing obligations to publicly disclose the changes of share-ownership, simply because they have purchased corporate shares, and simply because they objectively enjoy specific relationships as relatives. Pursuant to this definition as set forth in Article 3, Subparagraph 2, of the Guidelines, a person, who subjectively has no intention to become a co-acquirer with others yet objectively acquires corporate shares and is related by blood or marriage to other acquirers, may fail to fulfill his or her filing obligation and is therefore subject to pecuniary fines under Article 178, Paragraph 1, and Article 179 of the enabling statute. Obviously, this definition is so broad as to exceed the scope of the term’s possible meaning, and hence creates additional filing obligations which are not stipulated by the enabling statute. Because the creation of filing obligations places a restriction on people’s constitutionally guaranteed autonomous right to information and property right, it shall be imposed by law instead of by administrative regulations. Therefore, Article 3, Subparagraph 2, of the Guidelines are in contravention of the doctrine of reservation to law under Article 23 of the Constitution, and in order to prevent stock market upheavals, it shall cease to apply no later than one year after this Interpretation is made public.