At an extraordinary board meeting, Ing said she would step down, while Ou also offered to resign as the CEO of the high speed rail company, which has been weighed down financially by heavy interest payments and other non-operating expenses.

Ou, a former deputy mayor of Taipei, attended the meeting in his capacity as a representative of the government-controlled China Aviation Development Foundation, a major shareholder. He was later elected at the meeting as the company's new board chairman.

Board members also decided Tuesday that an extraordinary shareholders' meeting will be held Nov. 10 to elect new board directors and supervisors. That will pave the way for the government to play a leading role in steering the future course of the debt-ridden company.

Meanwhile, Minister of Transportation and Communications Mao Chih-kuo said earlier in the day during a Legislative Yuan question-and-answer session that the government will not rule out the possibility of reducing or increasing THSRC's capital at an appropriate time.

"But this is not necessarily a top priority at the moment," Mao said in response to a question from ruling Kuomintang Legislator Sun Ta-chien.

Sun also asked if the government is likely to revise the law and adjust the company's depreciation and amortization schedules after the government gains a majority of seats on THSRC's board.

Mao responded that allowing the company to depreciate its assets over a longer period is an option, "but the feasibility of that approach requires further discussion." The privately run THSRC has been running the country's 345-km high-speed rail system under a build-operate-transfer (BOT) contract with the government. According to the contract, the company has to transfer ownership to the government after 35 years of operation.

The high-speed railway went into operation less than three years ago, but the THSRC had already incurred an accumulated loss of NT$70.2 billion as of the end of June this year, or about two-thirds of its total paid-in capital of NT$105.3 billion (US$3.23 billion).

The company informed the Ministry of Transportation and Communications (MOTC) of its financial woes in February. After discussions with the Executive Yuan, the MOTC agreed to assist the company in resolving its financial difficulties by seeking new bank loans.

However, creditor banks were reluctant to approve new loans unless the THSRC's five original shareholders injected more capital.

It is widely believed that Ou's replacement of Ing as the new THSRC chairman will make it easier for the company to obtain bank loans with the government's endorsement.

Since the news broke Monday about the government's decision to take control of the THSRC's board to chart its operational direction, the company's share prices on the GreTai Securities Market have skyrocketed over 100 percent. The daily trade volume has also exceeded 20 million shares, topping all other stocks traded in the local over-the-counter market.

In an interview with the media at the Legislative Yuan, Premier Wu Den-yih reaffirmed the government's stance on the THSRC issue -- maintaining normal operation of the high-speed rail system, no additional government funding or loan guarantees, and living up to standards of social justice and public expectations.

Noting that the high-speed railway has become one of Taiwan's most important transportation arteries, Wu said the government will not let it fail and will do its best to keep it running smoothly.

Even though the THSRC faces a serious financial crunch, Wu said, the government still has to figure out a way to maintain its normal operations and financial viability.

On reports about irregularities that might be behind the company's financial crunch, Wu said the Taipei District Prosecutors Office has been investigating the case since early this year and that the watchdog Control Yuan has also launched a probe into the matter.

"We believe the facts will gradually surface through intensive probes by the judicial and supervisory bodies," Wu added.

Meanwhile, an unidentified board member representing the THSRC's private shareholders was quoted as having complained at Tuesday's meeting that it's unfair to describe the THSRC as a "mess" being passed from private to public hands.

"The THSRC is an asset rather than a liability to the government, " the private board director reportedly argued, adding that the company's assets would far exceed its debts if a reevaluation is made.

According to the THSRC's annual shareholders' meeting report, Continental Engineering Corp. is the company's largest single shareholder, controlling a 7.14 percent stake, followed by China Steel Corp. with 5.75 percent. Other major shareholders include the state-owned Taiwan Sugar Corp., with a 4.75 percent share; the China Aviation Development Foundation, with 4.59 percent; the CTCI Foundation, with 3.06 percent; and TECO Group, with 4.51 percent.

(By Sofia Wu)