False Financial Reports in Taiwan: Who May Claim Civil Damages

An investor who still holds shares can seek damages for a false financial report under Article 20-1, paragraph 1 of Taiwan's Securities and Exchange Act. The provision covers good-faith acquirers, sellers, and holders of the issuer's securities who suffer loss caused by misrepresentation or concealment in the report's essential content. A price decline alone does not establish every element of the claim or the recoverable amount. An issuer's admission of falsity does not, by itself, establish all those matters either.

Purchase dates and continued ownership

A purchase date shows when a transaction occurred. It does not, on its own, establish good faith. Article 20-1, paragraph 1 also requires misrepresentation or concealment in essential content and loss caused by that defect.

Covered documents include the issuer's financial reports and financial and business documents filed or publicly disclosed under the Act, as well as financial reports filed or publicly disclosed under Article 36, paragraph 1 (Article 20, paragraph 2; Article 20-1, paragraph 1). An annual financial report is one such document (Article 36, paragraph 1, subparagraph 1).

Selling before the later announcement does not by itself rule out a claim. Article 20-1, paragraph 1 also covers good-faith sellers who suffer loss from misrepresentation or concealment in the report's essential content. Someone who acquired shares in their own name can consider a claim as an acquirer; someone who kept the shares can consider one as a holder. Each still has to establish the statutory requirements.

Brokerage arrangements also matter. If a customer engages a securities broker to buy or sell as a commission agent in the broker's own name, Article 20, paragraph 4 treats the customer as the acquirer or seller for paragraph 3. Article 20-1, paragraph 6 extends that rule to report-based claims under paragraph 1.

Liability depends on the person's role

Article 20-1, paragraph 1 names two groups of defendants: the issuer and its responsible persons, and the issuer's employees who signed or sealed the report or document in question. Either a signature or a seal suffices for the employee requirement. Helping prepare the report, or having a name printed on it, does not satisfy that requirement without a signature or seal. Responsible-person status is a separate legal classification; an accounting officer's signature alone does not establish that status. The report defect and resulting loss must still be established.

For the people listed in paragraph 1 other than the issuer, Article 20-1, paragraph 2 provides a defense. They must prove both that they exercised all due diligence and that they had good cause to reasonably believe the content contained no misrepresentation or concealment. Both parts are required. The issuer cannot use this defense.

What the attesting CPA did

Attestation alone is insufficient. A CPA who attests the covered reports or documents is liable if misconduct, or a violation or neglect of professional duties, causes the loss described in paragraph 1 (Article 20-1, paragraph 3). The claim therefore concerns both the work the CPA performed and its connection to the investor's loss.

Working papers can be sought through the court. To pursue that CPA liability, a good-faith acquirer, seller, or holder may ask the court to obtain the CPA's working papers and request to inspect or copy them. The CPA and accounting firm may not refuse (Article 20-1, paragraph 4).

Negligent defendants under paragraphs 1 and 3, except the issuer, pay in proportion to their degree of responsibility when their negligence causes the paragraph 1 loss. That proportional-liability rule does not apply to the issuer (Article 20-1, paragraph 5). A claim against the issuer still requires the essential-content defect and resulting loss specified in paragraph 1.

Trading misconduct and false reports have distinct provisions

Misrepresentation, fraud, and other acts sufficient to mislead others are prohibited during the public offering, issuance, private placement, or trading of securities. A person who breaks that rule owes compensation for the resulting loss of good-faith acquirers or sellers (Article 20, paragraphs 1 and 3). Paragraph 3 does not list holders.

For reports and documents, Article 20, paragraph 2 prohibits misrepresentation or concealment in the issuer's financial reports and financial and business documents filed or publicly disclosed under the Act. Article 20-1, paragraph 1 then identifies the claimants, including holders, and the defendants for the report-based claim. That distinction matters to holders seeking compensation for a false report.

Audit, attestation, and quarterly review

Under Article 36, paragraph 1, subparagraph 1, a company that has issued securities under the Act must announce and file its annual financial report with the competent authority within three months after each fiscal year ends, unless that authority provides otherwise for special circumstances. The chairperson, managerial officer, and accounting officer must sign or seal it. A CPA audits and attests it; the board approves it, and the supervisors recognize it. A company with an audit committee is exempt from that supervisor-recognition requirement (Article 14-5, paragraph 4).

Companies that have issued stock under the Act and have an audit committee must normally obtain committee approval for their annual financial reports. Approval by at least half of all committee members and a board resolution are required. The same rule covers second-quarter reports requiring a CPA audit and attestation (Article 14-5, paragraph 1, subparagraph 10). These reports cannot use paragraph 2's board-only override. If good cause makes it impossible to convene the committee, paragraph 3 requires approval by at least two-thirds of all directors, together with opinions indicating approval from the independent-director members. Under paragraph 5, membership counts use the people actually in office.

First-, second-, and third-quarter reports normally must be announced and filed within 45 days after the relevant quarter ends, subject to the same special-circumstances exception. The same three officers sign or seal them, a CPA reviews them, and they are reported to the board (Article 36, paragraph 1, subparagraph 2). Review is distinct from audit and attestation.

That distinction affects which CPA work is being discussed: Article 20-1, paragraph 3 concerns attestation. Article 14-5, paragraph 1, subparagraph 10 also lists second-quarter reports requiring a CPA audit and attestation among audit-committee matters. Articles 36 and 14-5 do not, on their own, identify every second-quarter report subject to that requirement.

The Act was checked on October 14, 2026. The database gives August 7, 2024 as the Act's latest amendment date (full text). Its competent authority is the Financial Supervisory Commission (Article 3). For the separate question of tax on a share sale, see Selling shares in a Taiwan subsidiary.

Questions about the documents can be sent to Hovering International Law Firm at wei@hoveringlaw.com.tw.

Claims are also subject to time limits. Under Article 21, a damages claim under the Act is extinguished if it is not exercised for two years after the claimant learns of the cause entitling them to compensation. The provision also applies once more than five years have passed since the offering, issuance, or trade. Those are different statutory starting points; a later correction announcement is not automatically the starting date for both.

The annual financial report, any later corrective disclosure, and the purchase and holding records allow the disputed entries, signatures, and transaction dates to be compared. The reporting defect and its connection to the claimed loss still need to be established.

Official sources

• Taiwan Securities and Exchange Act Article 3, Article 14-5, Article 20, Article 20-1, Article 21, Article 36
• Taiwan Securities and Exchange Act full text (latest amendment August 7, 2024)
• Official English text

Checked: October 14, 2026