TAIWAN Trends and Developments Contributed by: Weita Liao, Denise Jen, Arthur Chang and Peter Chen, LCS & Partners
Review may even ban PRC investors from investing in Taiwan if their background is deemed to have sig - nificant influence on national security. The conse - quences in connection with any non-compliance with the above-mentioned laws would lead to Taiwanese authorities taking a range of actions, including impos - ing fines, requesting violators to divest part or all of their Taiwanese investments, suspending sharehold - ers’ rights, and revoking corporate registration of the invested companies in Taiwan. In addition, the term “PRC investors” has been broadly defined to include any PRC entities and “PRC-invest - ed companies in other jurisdictions”. The latter refers to those entities incorporated outside of the PRC and invested in by PRC entities or individuals that (i) directly or indirectly hold more than 30% of the shares of such entities; or (ii) have the ability to control such entities. Detailed guidelines from the Department of Investment Review explain what counts as “the ability to control” and to “directly or indirectly hold more than 30% of the shares”. On 30 December 2020, a stricter regulation and sev - eral new administrative rules on PRC investors were released which further tighten the restrictions on PRC investors in every respect, including explicit regula - tion on the variable interest entity (VIE) structure and a broader definition of the above “PRC-invested com - panies from other jurisdictions”. Protections on national critical technologies On 5 December 2023, the Executive Yuan announced the “National Critical Technologies List” in accordance with the National Security Act which was amended by Taiwan’s Congress in 2022. This initial list com - prises 22 items in defence technology, space tech - nology, agriculture, semiconductors and information security, identified as having dominant advantages and urgent protection needs for national security. On 31 December 2024, the Executive Yuan further added ten new items to the list, covering areas such as space, quantum technology, semiconductors and energy, and most recently, on 13 February 2026, the list was further expanded to 42 items. This expansion necessitates more robust protection of trade secrets involving military, space, and dual-use applications. These continuous updates underscore Taiwan’s com -
mitment to fortifying its legal framework to safeguard the core technological advantages that underpin its national security. According to Article 3, paragraph 1 of the National Security Act, any person shall not engage in the fol - lowing activities for foreign countries, mainland China, Hong Kong, Macau, hostile foreign forces, or organi - sations, institutions, groups, or individuals dispatched by them. • Obtaining trade secrets of National Critical Tech - nologies through theft, occupation, deception, coercion, unauthorised reproduction, or other improper means, or using or leaking them after acquisition. • Reproducing, using or leaking trade secrets of National Critical Technologies known or held with - out authorisation or beyond the authorised scope. • Holding trade secrets of National Critical Technolo - gies and failing to delete, destroy or conceal the secrets after being informed by the owner of the trade secrets. • Knowing that others have obtained, used or leaked trade secrets of National Critical Technologies under the circumstances specified in the preced - ing three items and obtaining, using or disclosing them. Paragraph 2 of the same Article further specifies that “any person shall not intend to engage in any of the acts specified in the preceding paragraph for the use of trade secrets of National Critical Technologies in foreign countries, mainland China, Hong Kong, or Macau”. The above provisions aim to strengthen the protec - tion of trade secrets related to National Critical Tech - nologies to ensure national security and competitive advantages in the industries. Anticipated material changes in the near future Considering the heightened political tensions between Taiwan and Mainland China, PRC investment into Tai - wan may become more strictly regulated going for - ward. Even unambiguous cases may face higher scru - tiny and a longer review period from the Department of Investment Review. Due to the current policies of
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