TAIWAN Law and Practice Contributed by: Ken-Ying Tseng, Vivian Cheng, Julia Kuei-Fang Yung and Gail Chang, Lee and Li Attorneys-at-Law
6.8 Additional Governance Rights If the buyer does not seek 100% ownership of the target company, the buyer may seek to amend the constitutional documents of the target company (as a condition to the completion of transaction) to include certain protection (such as a higher voting thresh - old for director or shareholder decisions over certain matters, if allowed by the Company Act or relevant law). In a private company context, the buyer may also enter into a shareholders’ agreement with major shareholder(s) and ask the major shareholder to sup - port the directors and c-level executives nominated by the buyer, cause the target company to provide information requested by the buyer, etc. However, whether and how such shareholders’ agreement may be enforced under Taiwan law is subject to the court’s test on case-by-case basis. 6.9 Voting by Proxy Shareholders can vote by proxy in Taiwan. A share - holder may appoint another person as their proxy by specifying the scope of appointment in the proxy instrument prepared by the target company to attend and vote at a shareholders’ meeting, provided that a shareholder may appoint only one proxy to attend and vote at such meeting. 6.10 Squeeze-Out Mechanisms In practice, if the bidder is not certain or confident that the merger/share exchange will be approved by the target company’s shareholders’ meeting, they can take a two-step approach. First, the bidder can launch a tender offer to acquire the majority of the target company’s shares. After the completion of the tender offer, the bidder can conduct a cash merger/ share exchange with the target company to squeeze out the target company’s minority shareholders. In a private company, the merger must be approved by the majority of shareholders present at the sharehold - ers’ meeting. The meeting must be attended by share - holders holding two-thirds of all the target company’s issued shares. In a public company, if the meeting is attended by shareholders holding the majority of the voting shares in the target company, a two-thirds majority of those shareholders is sufficient.
6.11 Irrevocable Commitments Transactions may involve agreements with major shareholders of the target company to vote to approve the transaction at the shareholders’ meeting of the tar - get company. However, whether and how such agree - ments may be enforced under Taiwan law is subject to the court’s test on case-by-case basis. In the case of a friendly tender offer, the offeror usu - ally will enter into the tender agreement with major shareholder(s) of the target company to ensure that such major shareholder(s) will tender their shares to the offeror once the tender offer is launched. However, all contractual 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 ten - der offer prospectus. In the context of a transaction between private com - panies, a bid would not generally be made public. If either party is a public company, the material terms of the transaction, including price and conditions to closing, must be uploaded to the website designated by the FSC. The announcement is usually made with - in one day after the board of directors approves the proposed transaction and execution of the definitive agreement. In the case of a tender offer, before launching the ten - der offer, the bidder must publicly announce it and file it with the FSC. 7.2 Type of Disclosure Required If the bidder is a public company, issuance by the bid - der of shares as consideration in a proposed transac - tion requires the bidder to make a registration with the FSC, unless an exemption is available, such as private placements to specific persons only. If registration is required, the bidder shall prepare a prospectus, which shall be uploaded to the website designated by the FSC. 7. Disclosure 7.1 Making a Bid Public
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