22 March 2021
The Grand Criminal Chamber of the Supreme Court rendered the 108-Tai-Shang-Da-Four-Zi-2261 Adjudication of October 29, 2020 (hereinafter, the “Adjudication”), holding that when an actor engages in one act that constitutes the criteria for the offense of non-arm’s length transaction and the offense of special breach of trust under Article 171, Paragraph 1, Subparagraphs 2 and 3 of the Securities and Exchange Law, the actor shall be penalized based on imaginative joinder of offenses for one of the offenses which entails a heavier penalty.
According to the facts underlying this Adjudication, Appellant A was the Finance Director of Company B (a managerial officer of the company), which issued securities in accordance with the Securities and Exchange Law. Obviously aware that Company C was not capable of implementing a construction project of Company B and did not conduct the actual implementation after the project was awarded to it, Appellant A hollowed out Company B’s assets and caused major damage to the company by pretending that Appellant D had been the contractor of this project in the name of Company C out of the joint intent to pursue the gains of his own and of others in conjunction with the Chairman of Company C (i.e., Appellant D) and through communication of their criminal intent in breach of Appellant A’s duty and in violation of arm’s length transaction.
The main legal dispute in this matter is how to determine the penalty on the Appellant, who committed one act that constitutes the criteria for the offense of non-arm’s length transaction and the offense of special breach of trust under Article 171, Paragraph 1, Subparagraphs 2 and 3 of the Securities and Exchange Law, respectively.
The Adjudication also pointed out the issue of whether the offenses that violate the multi-layered legal interests that should be protected involve imaginative joinder of offenses or an overlap of legal provisions. In this regard, the primary and secondary relationships with the legal interests to be protected should be explored based on the regulatory protective objectives and legislative spirit of individual penal laws, and the joinder relationship should be determined by considering if the same primary legal interests are to be protected.
Furthermore, according to the Adjudication, the history of amendments to Article 171, Paragraph 1, Subparagraph 2 of the Securities and Exchange Law shows that the legal interests to be protected against the offense of non-arm’s length transaction are not just limited to the legal property interest of a company that issues securities, but rather the focus is on the social and legal interests such as the development of the stock market, financial order and unspecified investors, and such offense is an offense against multi-layered legal interests. However, the offense of special breach of trust and the offense of special embezzlement under Article 171, Paragraph 1, Subparagraph 3 as amended are special provisions concerning the offense of embezzlement and the offense of breach of trust under the Criminal Code. In reference to the legislative purposes of the Securities and Exchange Law, the offense of embezzlement and the offense of breach of trust that originally only protect the legal property interest of a company are obviously changed into offenses against multi-layered legal interests. As a result, such offenses also focus on the social and legal interests in the protection of stock market development, financial order and unspecified investors.
Although the above two offenses are both offenses against multi-layered legal interests, still whether the damage incurred by a company that issues securities as a result of the actor’s embezzlement or breach of trust reaches the quantitative threshold of NT$5 million is the basis for applying the Securities and Exchange Law or the Criminal Code for the offense of special embezzlement or the offense of special breach of trust. This shows that more emphasis is put on the protection of the overall property interest of individual companies. This is obviously different from the offense of non-arm’s length transaction, which primarily protects the social and legal interests of stock market development, financial order and unspecified investors.
In view of the legislative purposes, the scope of the constituting criteria, and the regulatory protection purposes of Article 171, Paragraph 1, Subparagraphs 1 and 2 of the Securities and Exchange Law, it was concluded in the Adjudication that although the offense of non-arm’s length transaction and the offense of special breach of trust are included in the same paragraph of the same article, still they are not overlaps in legal provisions since the main legal interests to be protected for the two are not the same. When an actor engages in one act that constitutes the criteria for both of the offenses, the actor should be penalized based on imaginative joinder of offenses for one of the offenses which entails a heavier penalty.
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For further information, please contact:
Oli Wong, Lee Tsai & Partners
lawtec@leetsai.com
