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Amendments to the Regulations Governing the Acquisition and Disposal of Assets by Public Companies
Amendments to the
Regulations Governing the Acquisition and Disposal of Assets by Public Companies
On January 28, 2022, Taiwan's Financial Supervisory Commission (FSC) announced the latest amendments to the Regulations Governing the Acquisition and Disposal of Assets by Public Companies (the "Regulations"), which aim to strengthen the controls over related-party transactions and adjust the regulatory rigor in order to keep up with the common practice of such transactions. These amendments to the Regulations, set to take effect on January 30, 2022, are summarized as follows:
I. A related-party transaction reaching a certain price threshold will be subject to the approval by the shareholders' meeting (Amended Article 15 of the Regulations)
In order to enhance the controls over related-party transactions and to protect shareholders' rights to express their opinions on and supervise such transactions, this amendment makes reference to relevant legislations in other jurisdictions to stipulate an additional requirement that if a public company, or a subsidiary thereof that is not a public company in Taiwan, engages in an asset transaction (either an acquisition or a disposal) with a related party and the price thereof reaches 10% of the public company's total assets, the public company is required to submit relevant materials to and obtain the approval of its shareholders at a shareholders' meeting before implementing such asset transaction. Nevertheless, to avoid an overly broad application of this rule, shareholders' approval is not required for asset transactions between a public company and its parent company or subsidiary, or between the subsidiaries of a public company.
II. Clearer requirements and procedures on the issuance of external expert opinions (Amended Articles 5, 9, 10 and 11 of the Regulations)
These amendments expressly prescribe that the professional appraisers (and their personnel), accountants, attorneys and securities underwriters that are involved in the preparation and issuance of an independent valuation report or expert opinion to a public company must comply with the applicable laws and regulations as well as the self-regulatory guidelines of the industry associations to which they belong.
Meanwhile, the pre-amendment Article 9 of the Regulations stipulates that if a public construction company engages in an asset transaction reaching a certain price threshold, it must obtain a valuation report promptly; if it fails to do so due to legitimate reasons, it may obtain said valuation report within two weeks from the date of the transaction. However, if the difference between the estimated asset price provided in the valuation report and the actual transaction price reaches a specified percentage, an accountant's opinion must also be procured within the same two-week timeframe. Considering the actual time needed for a public construction company to secure an accountant's opinion, under the amended Article 9, the timeframe for submitting such accountant's opinion is extended to two weeks from the date of the valuation report.
III. Relaxation of Information Disclosure Requirements for Certain Transactions (Amended Article 31 of the Regulations)
As public companies are not required to disclose and report their trades of Taiwan government bonds, this amendment further relaxes the relevant disclosure and reporting requirements, allowing trades of foreign bonds with the credit ratings not lower than Taiwan's sovereign rating need not be disclosed or reported. In addition, considering that trades of foreign government bonds are relatively straightforward transactions, and that trades of index investment securities and index equity funds are of similar nature, this amendment also waives the disclosure and reporting requirements for trades of foreign government bonds and index investment securities on primary markets by public companies that are investment professionals (as defined in the Regulations).
As this round of amendments to these Regulations will affect the planning and compliance of the acquisition and disposal of assets by public companies, public companies should revise their internal Rules and Procedures for the Acquisition and Disposal of Assets accordingly. If you have any questions about these amendments or wish to get more information or advice on this topic, please do not hesitate to contact us.