2024 New Independent Director Regulations hits the road! What impacts may be led to?

Independent Directors


The Financial Supervision Commision (FSC) released “Corporate Governance 3.0 -Sustainable Development Roadmap” in 2020, for the purpose of strengthening duties and functions of boards to enhance the sustainable value of enterprises, hoping to resolve the problem of “Perpetual Independent Directors”. As a result, TWSE and TSE promptly amended the “Corporate Governance Best Practice Principles for Listed and OTC Companies”, aiming to enhance corporate governance. Starting from 2024, the new framework mandates that at least a third of the board seats in listed and OTC companies must be held by independent directors, with a maximum of three consecutive terms. By 2027, this requirement will be applied to all listed and OTC companies. In this article, we will explain the difference in the content of independent directors framework and its impact after implementation. 

What are dependent directors?

Independent Director refers to a director within the board of directors of a listed or OTC company, and is independent from the company’s shareholders and does not hold an internal position within the company. They also have no significant business connections with the company’s management. Independent directors are capable of making impartial judgments regarding company affairs. In simpler terms, independent directors cannot be employees of the company, do not participate in specific operational matters, and hold little company stock. Their role is to enhance corporate governance and advocate for the rights of small and medium-sized shareholders.

In Taiwan, independent-director-related issues are regulated by the Securities and Exchange Act, governing qualifications, selection, tenure, and responsibilities of independent directors. Their primary duties include participating in the review and oversight of significant company decisions, forming audit committees, and reviewing financial statements, internal control systems, as well as auditor appointments.

Numbers of Independent Directors

The limitation on the number of independent directors significantly impacts corporate governance. Historically, Taiwan’s regulations required each listed or OTC company to have at least two independent directors, constituting no less than one-fifth of the total board seats. However, such provisions may result in the insufficient prominence of independent directors, as they may still not be able to fully utilize their effectiveness within the board of directors, which is also detrimental to protecting the rights of small shareholders..

In mature economies worldwide, countries with well-developed corporate governance systems tend to have more mature independent director frameworks. These countries also set higher requirements for the proportion of independent directors on corporate boards. According to data from various capital market regulations and a headhunting firm “SpencerStuart”, most European and American countries mandate that over half of the board seats be held by independent directors, with actual proportions often reaching 70% to 80%. In Asian countries like China and Japan, the requirement is for at least one-third of board seats to be filled by independent directors, and the actual representation exceeds 40%. However, based on statistics from the TEJ database, as of the end of December 2023, the proportion of independent directors in Taiwan’s listed and OTC companies still falls short of 40%, which is slightly below the international consensus.

In March 2023, the Financial Supervisory Commission (FSC) unveiled the “Sustainable Development Action Plan” to enhance corporate governance and align with international standards. Starting from 2024, publicly listed companies with capital exceeding 10 billion NTD as well as financial and insurance firms must appoint independent directors to occupy at least a third of the board seats. Furthermore, the tenure of independent directors cannot extend beyond three consecutive terms. The plan will be rolled out in phases, with all publicly listed companies expected to comply by 2027.

Comparison of Independent Directors' new and old regulation
Comparison of Independent Directors’ new and old regulation Source: TEJ

Independent Director shortage?

Basic requirements of independent director : Professionalism & Independence

In order to become an independent director, not only is five years of working experience required, but also professionalism and independence.


Independent directors must be/have:

  • Professors or speakers from college in the field of finance, law, accounting, or other business related fields.
  • License or certificate for being a lawyer, judge, attorney, accountant, or other occupation for business needs.
  • Working experience in the field of finance, law, accounting, or other business related fields

Simply put, professionalism is the understanding of the company’s business and its corporate goals, enabling independent directors to play the role as a consultant to provide guidelines for management.


Independent directors can’t be:

  • a stakeholder of the company.
  • the director, supervisor, or employee of the company in the past 2 years.  (Including regulations of consanguinity and affinity)
  • hold over 1% of the company’s share
  • the top 10 major shareholders of the company.

The purpose of the amendment is to prevent independent directors from having too long tenure, leading to independence concerns.

Where to find independent directors?

To comply with the rules for independent directors mentioned above is no simple task. If a company seeks suitable candidates, FSC recommends that companies can explore the ‘Independent Director Talent Database’ maintained by the Taiwan Securities and Futures Institute. The institution assists companies in identifying qualified independent directors and helps address any issues related to their appointment. As a result, there is currently no  shortage of independent director candidates.

Impact from new independent director regulations

Based on TEJ database, as of the end of October 2023, there are a total of 1798 listed and OTC companies, 13 of which have less than a third of independent director seats, 98 of which have independent directors with over 3 consecutive terms. Looking ahead to the new regulation to set sail in 2024,  111 companies would be affected and would need prompt adjustment.

To inquire about the information mentioned above, access TEJ (Taiwan Economic Journal) database and select the “Director Tot. Person” and “Ind. Director Person” under “Number of Directors Holding”. By applying a simple formula, they can identify companies where the independent director seats constitute less than one-third of the total board seats.

TEJ Database – Number of directors and independent directors Source: TEJ

The tenure of independent directors can be found in TEJ database, under “Directors Holding (Yearly)”.

Tenure of Independent Directors
Tenure of Independent Directors Source: TEJ
Companies with independent directors over 7 consecutive terms Source:TEJ

Independent Directors – A weapon to gain corporate control?

The establishment of independent directors is intended to replace supervisors. When independent directors carry out their duties, neither the company nor other members of the board of directors can restrict or hinder them. Independent directors can also request the board of directors to assign personnel or hire experts to assist them with their tasks. Additionally, independent directors have the same right to information as other directors.

From the above, it is evident that regulations grant significant power to independent directors. Therefore, when important matters arise during board meetings, if an independent director opposes or expresses reservations, it is essential to record such dissenting views in the minutes of the board meeting and disclosed it in material information and MOPS.

However, the substantial authority given to independent directors has led to contentious issues in recent years. According to the Securities and Exchange Act, individual independent directors have the right to independently convene extraordinary general meetings (EGM) without audit committee consensus or the approval from the board of directors or regulatory authorities. Unfortunately, this Act has been exploited as a tool to gain corporate control. Notable examples include D-Link (2332.TW), HEP (3609.TWO), TOP (3284.TWO), UFOC (4903.TWO), Solar (1785.TWO), and more recently, Taisun (1218.TW) and C.F.Corp. (1435.TW) in 2023. These incidents raise concerns about the potential abuse of independent directors’ rights, undermining their independence.


The independent director system in Taiwan has been in place since its introduction in 2002, and the implementation of the new independent director regulations in 2024 is expected to further align the corporate governance of Taiwan’s listed and OTC companies with international standards. The new regulations raise the requirements for the number of independent directors in companies, ensuring that they have a more significant impact within the board of directors. Additionally, it is hoped that independent directors can fight for the rights of small shareholders.

The implementation of the new regulation still faces challenges. Firstly, the demand for independent directors has increased rapidly, making it difficult for companies to find suitable candidates with the necessary expertise and independence. However, before the new regulation comes into effect, there is concern about a potential ‘independent director shortage’ during the 2024 independent director elections. Additionally, there have been instances of abuse of independent directors’ rights in recent years, with these positions becoming tools for management or shareholders to vie for control. The new law indirectly enhances the proportion of independent directors and their governance rights, which will require us to continue observing the potential positive or negative impacts on companies’ operations.

Corporate Governance is one of the scope in ESG,find more director and control rights data in TEJ ESG Sustainability Solution.