TAIWAN Law and Practice Contributed by: Susan Lo, Chi Lee and Evelyn Shih, Lee and Li Attorneys-at-Law
transaction had a local effect on the Taiwanese mar - ket. In June 2023, the FTC further relaxed the FTA to exclude notification requirements from those combi - nations where foreign enterprises establish or operate a JV outside Taiwan that does not engage in “eco - nomic activities” within Taiwan. Economic activities are defined as those involving the supply and demand of goods or services in Taiwan. Additionally, the FTC abolished the Guidelines on Handling Extraterrito - rial Combinations in June 2023 as a supplementary measure to the amendment of the FTA, to the effect that any extraterritorial combination meeting the fil - ing thresholds must be notified with the exception of the newly defined non-notifiable type, as noted in the foregoing. The FTC also amended the FTC Disposal Directions (Guidelines) on Handling Merger Filings, specifying that the simplified procedure now applies to combi - nations where: • the transaction value is below TWD2.5 billion; • in horizontal combinations, the combined Taiwan revenue of relevant products or services does not reach TWD200 million; • in vertical combinations, none of the participating parties generate TWD200 million or more in Taiwan for the relevant products or services; or • the enterprise being combined generates no Tai - wan revenue. 3.5 Listed Companies and Market Disclosure Rules If a JV participant is a listed company in Taiwan, it will be subject to the rules issued by the Taiwan Securi - ties Exchange or the Taipei Exchange, as applicable, which mainly include the obligation to disclose the material information of the JV project, corporate deci - sion procedural requirements and investing amount limitations to engage in such investments. 3.6 Transparency and Ownership Disclosure Disclosure Requirements Under the Company Act Under the Company Act, companies are required to make an annual report containing the information of directors, supervisors, managerial officers and share -
holders holding more than 10% of the total shares, including their names, nationalities, shareholding, date of birth (for individuals) or the date of incorpo - ration (for entities), and other items required by the competent authority. To promote full and timely disclosure of any signifi - cant changes in a public company’s shareholding structure, Taiwan recently announced amendments to the Securities and Exchange Act. The threshold for a public company to report and disclose a substantial shareholding that any person acquires, either individu - ally or jointly with others, has been lowered from 10% to 5%. The new SEA amendments took effect on 10 May 2024. Additional Disclosure Requirements Under the FDI Regime and AML Requirements The DIR also generally requires the applicant to dis - close information it holds on the major shareholders and ultimate beneficial owner (UBO) for the purpose of the DIR’s foreign direct investment review, and to ascertain any PRC involvement. Moreover, financial institutions in Taiwan are obliged to identify the UBO of their clients when conducting the customer due diligence process, according to the Regulations Governing Anti-Money Laundering of Financial Institutions. 4. Legal Developments 4.1 Notable Recent Decisions or Statutory Developments There have been several noteworthy court decisions in Taiwan over the past three years relating to JVs, par - ticularly clarifying the interpretation of non-compete clauses in JV agreements. In Taiwan High Court 113-Shang-Zi No 141, the court interpreted a non-compete clause in a JV agreement between two parties who co-founded a biotech com - pany. The clause prohibited either party from engag - ing in competing business for two years post-termi - nation. The court held that the restriction only applied to business activities that the JV company was legally permitted to conduct. Since the defendant’s post-ter -
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