TAIWAN Law and Practice Contributed by: Susan Lo, Chi Lee and Evelyn Shih, Lee and Li Attorneys-at-Law
cific statute regulating JVs. JV parties typically agree on the following key rights and obligations: • profit sharing and loss allocation, usually in propor - tion to their capital contributions unless otherwise stipulated; • governance and management rights, including board representation, veto rights on reserved mat - ters and participation in key decisions; • access to information including financial reports, operational updates and board materials, often reinforced through shareholder agreements or information rights clauses; and • non-compete and non-solicitation obligations, which preclude parties from engaging in compet - ing businesses during, and sometimes after, the JV term, subject to reasonableness and enforceability under Taiwan law. Profits and losses are generally distributed in accord - ance with the parties’ equity stakes, unless the JV agreement provides otherwise. There are no general statutory restrictions on how profits and losses must be allocated, but the arrangement must be clearly documented to avoid disputes. Courts may uphold alternative arrangements if they reflect the parties’ true intent and are not contrary to laws and public policy. Regarding liabilities arising from JV activities in Tai - wan, if the JV company is structured as a company limited by shares or a limited company, each party’s liability is limited to its capital contribution. If the JV is structured as a limited partnership, the general part - ner is jointly and severally liable for the JV’s debts and obligations, while the limited partners’ liabilities remain limited to their respective capital contributions. However, if the JV is structured as a contractual or unincorporated JV and the arrangement resembles a partnership, the parties may be held jointly and sever - ally liable for the JV’s debts and obligations under the principle of partnership liability. 6.7 Minority Protection and Control Rights In Taiwan, minority members of a JV typically protect their interests through a combination of contractual rights and structural safeguards in the JV agreement and constitutional documents. These protections are
especially critical in international JVs, where asym - metries in control and barriers to information access may arise. Common key mechanisms under JV agree - ments include the following. • Board representation and voting rights: Minority parties often negotiate for board seats and veto rights over reserved matters, such as changes to the business scope or capital structure, or the transfer of key assets, to ensure participation in major decisions and prevent unilateral actions by majority shareholders. • Information and audit rights: Minority investors typically secure access to financial statements, operational reports and inspection rights. These provisions are essential for monitoring performance and fostering transparency. • Non-compete and exclusivity provisions: To safe - guard the JV’s commercial value, minority parties may require non-compete obligations from other shareholders and exclusivity in certain markets or technologies. • Exit and transfer rights: Tag-along rights, put options and pre-emptive rights are commonly used to protect minority interests in exit scenarios or changes in ownership. These rights help ensure that minority parties are not left behind or diluted without recourse. 6.8 Applicable Law and Dispute Resolution in International JVs In international JVs involving Taiwan, the selection of substantive and procedural law is a foundational aspect of legal structuring. Where the JV’s core activi - ties are mostly conducted in Taiwan, it is generally advisable to adopt Taiwan law as the governing sub - stantive and procedure law. This ensures consist - ency with local regulatory frameworks and facilitates enforcement by Taiwan courts. While Taiwan courts are competent and accessible, JV parties – particularly in cross-border arrangements – often prefer alternative dispute resolution (ADR) mechanisms outside Taiwan. Arbitration is commonly selected for its neutrality and efficiency. For example, the Singapore International Arbitration Centre (SIAC) is frequently chosen for JVs involving Asian entities, while the International Centre for Dispute Resolution
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