TAIWAN Law and Practice Contributed by: Susan Lo, Chi Lee and Evelyn Shih, Lee and Li Attorneys-at-Law
directors are prohibited from engaging in self-deal - ing with the JV entity without disclosing the nature of such transactions to, and receiving approval from, the meeting of shareholders (Articles 206 and 209 of the Company Act). In Taiwan, the board of directors is allowed to delegate its functions to committees such as audit, compensation, nomination and independent committees. 7.3 Conflicts of Interest In the event of a shareholder having conflicts of inter - est in a specific matter that may harm the interest of the company, the Company Act requires that the shareholder cannot participate in voting nor act as proxy for another shareholder. Similarly, a director who has a conflict of interest has to explain the mate - rial content thereof and cannot participate in voting if such conflict could harm the interest of the company. JV participants are advised to consider the neces - sity of licensing agreements or IP/technology transfer agreements as early as possible before launching a JV project. The ownership of new IP developed in and out of the JV entity’s business scope is one of the key areas of consideration. It is essential to clarify the contract purpose and scope to determine IP ownership under contractual collaborations. Depending on the industry, JV partici - pants often have to deal with the use, development and transfer of IP, such as patents, trade marks, copy - rights, trade secrets or know-how, in JV agreements. IP can be a valuable asset and may be considered as a capital contribution. 8. IP and ESG 8.1 Ownership and Use of IP IP clauses are sometimes included in JV agreements, but they are more often separately addressed in an IP assignment and/or licensing agreement between the JV entity and one or more JV participants. 8.2 Licensing v Assignment of IP Rights In many cases, licensing IP rights to facilitate the JV entity’s operation is preferred, because assigning IP
rights tends to be more complex and time-consuming than reaching a licensing agreement. 8.3 ESG Considerations in JVs Investors are increasingly interested in ESG projects as customers have more awareness of ESG issues now. In addition, a JV project that follows ESG princi - ples or addresses ESG issues will likely achieve better long-term performance, as shown by recent studies in Asia. The Financial Supervisory Commission in Taiwan is promoting new policies requiring public companies to disclose their ESG efforts by submitting ESG reports. As one of the Taiwan government’s initiatives to respond to climate change, the National Development Council published the key strategies for “Taiwan’s Pathways to Net-Zero Emissions in 2050” in 2022, which aims to reach the target of net-zero greenhouse gas emissions by 2050. In general, JV entities are not subject to mandatory obligations to take action on aspects of ESG if they are not public companies or financial institutions. However, enterprises in Taiwan are encouraged to incorporate ESG guidelines into their business strat - egies and management systems. Currently, the “Action Plan for Sustainable Develop - ment of Listed Companies” and the “Climate Change Response Act” are the primary ESG-related regula - tions in Taiwan. Whether the recent announcement/ enactment of this legislation will affect JV arrange - ments in Taiwan will be closely monitored over the coming years. 9. Exit Strategies and Termination 9.1 Termination of a JV From a contractual perspective, the parties to a JV arrangement usually include a put option and/or a call option provision to buy out each other’s shares in the JV agreement as part of the exit arrangements. If the JV party decides to exercise the put/call option, the participants might need to negotiate the value of each share of the JV entity if the calculation is not pre-agreed in the JV agreement.
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