15 Apr 2019 Taiwan Legal Update: Apple Sidra Disputes and Renewable Energy Development
FSC Urges TWSE to Check Independent Director Qualification Owing to Apple Sidra Disputes
The head of Financial Supervision Commission(FSC), Wellington Koo, confirmed that Drinks maker Oceanic Beverage Co., Inc. was suspicious in the matter of the financial statements due to the disclaimer of opinion from the auditors. In addition, some doubt remains with regard to the qualification of independent director of this beverage cooperation.
The Oceanic Beverage Co., Inc. one of the biggest drink producers in the country, is famous for manufacturing apple-flavored soft drink, Apple Sidra. Oceanic Beravage spent NT$640 million last year to carry out real estate and fund loans and transactions with Cathay Beverage. The transaction price and repayment terms are unreasonable. As the three transactions could not obtain “sufficient and appropriate evidence”, auditors are reluctant to endorse and issue a rare “disclaimer of opinion” as a result.
It is the certified public accountants’ duty to act pursuant to laws or regulations of the competent authority with the relevant jurisdiction and carries out the audit, review, secondary review, or special audit, prepares an opinion based thereon, and affixes his or her signature or seal to the opinion. What the CPA of Oceanic Beverage did is correct, Koo said. Since the company cannot provide adequate evidence to clarify the integrity of several real estate transactions between Oceanic and Cathay Beverage, it is reasonable that the auditor issued a disclaimer as he cannot certify the fair-presentation quality of the financial statements. The Oceanic Beverage Co., Inc. shall elaborate on the doubtful transaction.
FSC’s Chairman Koo pointed out there were problems with the identity for independent directors of the Apple Sidra’s manufacturer. As a matter of fact, two of the independent directors are the employee of the business partner, Cathay Beverage, which is the supervisor of the Apple Sidra’s manufacturer in the meanwhile. This violates Article 14-2 of Securities and Exchange Act. Many condemned that it was rather absurd as the Taiwan Stock Exchange(TWSE) failed to realize the defect in the first place.
On April 14, the general manager of Oceanic Beravage, You-ying Sun, allegedly hollowing out the company, was detained by the court’s judgment. Chairman Kuo-kuei Chiang was released on bail of NT$150,000, while four independent directors were bailed on bonds of NT$34,000 to NT$400,000 after questioning, the prosecutors said. The company’s board of directors yesterday held an emergency meeting and dismissed Chiang and Sun.
The FSC has strongly request TWSE and other competent authorities to strengthen the supervision and review the qualification of independent director in the future. The Oceanic Beravage has been banned from stock trading by TWSE. The chance of delisting is fairly high.
Laws Amended to Accelerate Renewable Energy Development
On April 12, the Legislative Yuan approved the largest revamp with regard to Renewable Energy Development Act since the enactment of legislation on 2009, which aimed to reach a total of capacity of 27 gigawatts of the nation’s renewable energy sources by 2025.
According to the revision of the bill, the regulations on the development of renewable energy were enlarged by adding the goal of improving energy makeup and reduce greenhouse gas emissions. In order to activate existing water conservancy facilities for power generation, small hydropower facilities of less than 20,000 gigawatts will be included in the scope of renewable energy power generation equipment after the amendment, and the definition of ocean energy will also be widened, referring to ocean temperature difference energy, wave energy and current flow.
Meanwhile, to strengthen corporate responsibility, large-scale electricity users consuming a certain amount of electricity has the obligation to install renewable energy power generation and storage equipment in the future or purchase a certain amount of renewable energy certificates. Those who fail to comply with regulations shall pay the commissions to the development of renewable energy. Couple with this, the Ministry of Economic Affairs(MOEA) should set up a renewable energy development fund for the development of renewable energy.
Local governments, in their jurisdiction, shall evaluate the potential for developing renewable energy sources, and may establish power generation facilities with an installed capacity of up to 2,000 kilowatts, the act says. On the other hand, power generation facilities with an installed capacity of greater than 2,000 kilowatts should be authorized by the MOEA.
If the premises of the public agencies, schools or state-run enterprises undergo expansion or renovation, or if new structures are erected, they should be equipped with renewable energy generation facilities as long as sites meet the requirements. The parliament hopes the amendments would bring Taiwan clean energy, boost its economy and improve its global competitiveness.
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