|
Pursuant to Article 21-1 of the Securities and Exchange Act, when the essential content of the financial reports of public companies contain misrepresentations or nondisclosures, the persons who are judged with act of negligence for the misrepresentations or nondisclosures shall bear liability for damages in proportion to their degree of responsibility. Based on the legislative explanation of this Act, it also leaves the court to decide the percentage of damage remedy for each liable person , case by case, based on considerations, as a whole, of the person’s misconduct or negligence features of not able to preventing the misrepresentations or nondisclosures from occurrence. However, in most of cases, the misconduct or negligence are not so obvious that can directly link to the causes of mispresented or nondisclosed financial reports. As a result, currently, the rationales used by courts to determine the percentage of damage remedy are very subjective and lacking predictable feature.
This thesis is trying to propose an objective and computable mathematical calculation to determine the percentage of damage remedy. First, this thesis studied how is the reliable parties’ role or duty for the financial reports, and how the financial reports affect on the company’s stock price. Then, it concludes an observation that negligent persons could be aggregated by their roles or duty to share the same responsibility, and subsequently designated different weighted percentage for each group of negligent persons to reflect their different roles and responsibilities. Also, this thesis brought up an idea that a company’s net value should be used as an adjustment in order to reduce the downside that defends will overconsume the remedy responsibility under the gross income loss method as stock price is also affected by market factors other than just financial reports. Through this mathematical calculation, it also prevents that the persons charged with act of negligence pay out more remedy amounts than those who are charged with intent act. Moreover, since the Article 21-1 of the Securities and Exchange Act effected in 2006, there have been many judgements ruled by courts. Via studying and analyzing these judgments to identify views in common and leverage those views to form this mathematical calculation. |