TAIWAN Law and Practice Contributed by: Ken-Ying Tseng, Vivian Cheng, Julia Kuei-Fang Yung and Gail Chang, Lee and Li Attorneys-at-Law
5. Negotiation Phase 5.1 Requirement to Disclose a Deal
arrangements between the offeror and the insiders of the target company (including major shareholders holding more than 10% of the shares and directors, etc) must be fully disclosed in the tender offer pro - spectus to be made available to the public by the offeror pursuant to the TO Regulations. 6. Structuring 6.1 Length of Process for Acquisition/Sale The timeline for acquiring/selling a business in Taiwan heavily depends on whether the target company is a public company, whether the approval of the share - holders’ meeting is required, and whether any regula - tory approval is required to be obtained, but generally speaking, six to twelve months if all of the above ele - ments are involved, subject to variations in specific industries. 6.2 Mandatory Offer Threshold A mandatory tender offer bid is required for an acqui - sition of 20% or more of the issued shares of a public company within 50 days. 6.3 Consideration Both cash and shares are commonly used in M&A transactions. In terms of public takeover deals, cash is more commonly used as it would be easier for the acquirer to obtain a 100% equity interest using the cash-out share exchange structure. A fairness opinion from an independent expert such as CPA, together with a reasonable premium, are usu - ally required. In practice, a 20% to 40% premium is commonly seen to be offered by bidders. However, there would be a limited solution for a gap in the tar - get company’s value; the main reason may be that a post-completion payment or hold-back arrangement is infeasible for a public company deal under Taiwan law. A warranty and indemnity (W&I) insurance may be helpful if the gap is related to certain contingent liabilities/loss of the target company. 6.4 Common Conditions for a Takeover Offer The common conditions of a tender offer are as fol - lows.
The target company’s requirement to disclose a deal only applies if the deal involves a public company. 5.2 Market Practice on Timing As required by the relevant law and regulations, the target company will announce a deal right after its board of directors approves the deal, and the defini - tive agreement will be signed on the same date the board approves the deal. Market practice regarding disclosure is generally consistent with the require - ments described in 5.1 Requirement to Disclose a Deal . 5.3 Scope of Due Diligence Usually, the scope of legal due diligence is full cover - age, which, subject to the nature of the deal and the acquirer’s focus, includes the following: • basic corporate documents; • shareholding, issuance of securities; • labour and employment matters; • material assets (including real properties); • intellectual property rights; • any litigation, dispute or investigation involving the target company and its directors, claims and proceedings; • material contracts and related party transactions; • financing arrangements; • insurance policies and any indemnification records; and • sanctions received by the target company for viola - tion of laws or regulations and any other sanctions which may have material impact on the target company. 5.4 Standstills or Exclusivity Standstills and exclusivity are commonly demanded by bidders/potential buyers in M&A transactions. 5.5 Definitive Agreements In the case of a friendly tender offer, the offeror usually will enter into the tender agreement with major share - holders of the target company to ensure that such major shareholders will tender their shares to the offer - or once the tender offer is launched. All contractual
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