Newsletter
Family Business Succession Planning and Family Matters Series - The critical role played by guardians in family succession planning in light of the “adult guardianship by agreement” amendments to the Civil Code and the Family Act
I. Foreword
When founders or top executives of family businesses are found to have mental disability, different factions within the family tend to compete with each other for guardianship in order to take control of the family business or property management rights. This type of family succession dispute comes along once in a while, which fully demonstrates the significance of guardianship appointment.
In the middle of 2019, the Legislative Yuan passed the third reading of the “adult guardianship by agreement” amendments to the Civil Code and the Family Act to resolve such practical issues as family members fighting over guardianship or refusing guardianship altogether, or serious delays to guardianship appointment owing to the fact that even courts find family disputes difficult to resolve.
With the most recent amendments as a starting point, this article introduces and reviews the development of Taiwan’s guardianship system, as well as the newly amended articles, relevant procedures and additional measures for adult guardianship by agreement.
II. Adult guardianship by agreement in the Civil Code
1. Definition
“Adult guardianship by agreement” is an agreement whereby a person secures an agreement with his/her appointee that, in the event of the appointer being subject to the order of commencement of guardianship, the appointee agrees to act in the capacity of his/her guardian (Article 1113-2 of the Civil Code), thus replacing guardianship appointment by the ex officio order of the court (i.e. the former legal guardianship system). When the appointer is no longer able to make a declaration of intention, his/her voluntary wishes regarding guardianship appointment, previously made clear, will be respected by the court.
2. Can an adult guardianship agreement be withdrawn or terminated by the appointer?
To protect the rights of a person subject to the order of the commencement of guardianship, and to prevent situations where the appointed guardian is unfit or the guardianship appointment is not in the best interests of the appointer, the amendments specifically provide that, “before” the court orders the commencement of guardianship, the adult guardianship agreement made by and between the appointer and the appointee may be “withdrawn” by either party at any time. It is explained in the legislative reasons that, as the withdrawal by one party affects the interaction between the signatories as well as the content of the agreement, such withdrawal shall be construed as being undertaken by all signatories.
Additionally, “after” the court orders the commencement of guardianship, the appointer may, with good cause, apply for a court order to “terminate” the adult guardianship agreement. Therefore, after such order, if the appointer temporarily regains the ability to make a declaration of intention, he/she at this point still have the capacity to represent himself/herself in the proceedings, in accordance with Article 14-3 of the Family Act, and accordingly may apply for termination of the adult guardianship agreement. However, to protect the rights and interests of the person subject to the order of the commencement of guardianship, such person shall have good cause if he/she wishes to terminate the adult guardianship agreement (Articles 1113-5(1) and 1113-5(3) of the Civil Code).
3. The court, in ordering the commencement of guardianship, shall in principle appoint the appointee set forth in the existing adult guardianship agreement as the guardian.
In the future, when the court orders the commencement of guardianship, and the person subject to such order has an adult guardianship agreement, then the appointee specified in the agreement shall serve in the capacity of the appointer’s guardian (Article 1113-4(1) of the Civil Code). However, when the court issues such an order, should there be facts sufficiently showing that the appointed guardian does not serve the interest of the appointer or is unfit for the role, the court may ex officio appoint another person for the position (Article 1113-4(2) of the Civil Code).
4. The conclusion, modification, and withdrawal of an adult guardianship agreement shall be notarized by the notary public.
It is stipulated that the conclusion, modification, and withdrawal of an adult guardianship agreement shall be notarized by the notary public, who shall give a written notice to the court for the domicile of the appointer within the statutory time frame for it to take effect (Articles 1113-3(1) and 1113-5(2) of the Civil Code).
III. Most recent amendments to the Family Act
The following matters concerning the adult guardianship by agreement have been added to the Civil Code: “After the declaration of the commencement of guardianship of the appointer, he/she may apply for termination of the guardianship agreement.” (Articles 1113-5(3) of the Civil Code) and “The court may, upon application or ex officio, dismiss the appointee’s guardianship.” (Articles 1113-6(4) of the Civil Code). Accordingly, additions have been made to Articles 164 and 165 of the Family Act regarding matters concerning the declaration of commencement of guardianship, including giving permission to terminate the adult guardianship agreement and dismissing the appointed guardian in such an agreement. It is further stipulated that, in the matters of separately appointing or changing the appointment of an guardian and giving permission to terminate the adult guardianship agreement, the appointer subject to a guardianship commencement order shall have the capacity to represent himself/herself in the proceedings so as to safeguard his/her right to proceedings as a subject and right to attend court hearings.
IV. Conclusion: The role of adult guardianship agreement in planning family succession
Regarding family business succession, where a person has no capacity to make juridical acts and has become subject to an order of guardianship commencement, this person shall be represented by his/her guardian & statutory agent in all juridical acts, pursuant to Articles 76 and 1098 of the Civil Code.
If it is the founder or responsible person that has become subject to the order of guardianship commencement, the question of guardianship will have a serious impact on the power balance within and property management of the family. With the Civil Code amendment of adult guardianship by agreement, the founder or responsible person can now prevent future disputes and conflicts between their children and family members by following the foregoing regulations: Voluntarily appoint a guardian in advance, and proceed to conclude an adult guardianship agreement with notarization. It is noteworthy that, according to the aforesaid regulations, the appointer can have several appointees, each carrying out their designated task. That is to say, the appointer can appoint different persons to carry out different tasks, such as asset management and day-to-day care. The availability of such an option shows respect to the appointer’s free will in that he/she gets to make choices and envisage life under guardianship, prevents conflict in the family, and safeguards the appointer’s personal rights and interests as well as human dignity to the greatest extent. These advantages reflect the legislative intent of instituting adult guardianship by agreement. Family business leaders are encouraged to make full use of this system.