TAIWAN Law and Practice Contributed by: Lihuei Mao, Dennis Yu and David Tien, Lee and Li Attorneys-at-Law
potential risks associated with AI technologies, such as algorithmic bias and black-box effects. In addition, in response to the rising global concern about climate change issues, regulations and policies on the renewable energy industry and greenhouse gas (GHG) reduction have also been promulgated and enacted. It is advisable for foreign investors to be aware of related issues or other questions regarding the strategies for the implementation of GHG emis - sion reduction and conducting the renewable energy industry. Furthermore, Taiwan has proved to be a key player in the world’s semiconductor supply chain and has enacted relevant policies (including tax incentives) to facilitate more FDI and encourage Taiwanese com - panies holding key positions in global supply chains to keep their advanced R&D activities in Taiwan. In the near future, it is expected that the Taiwanese economy will grow steadily and Taiwan will continue to attract the attention of investors around the globe. The acquisition of a Taiwanese company is commonly structured as an acquisition of the shares in such com - pany (a so-called share deal) or an acquisition of the assets/business in such company (a so-called asset deal). Share deals include mergers, share exchanges or share swaps – whereas asset deals can be imple - mented via a spin-off, for example. Minority investments can also be structured as a share deal. In a share deal, the purchaser may subscribe for the new shares issued by the target company or purchase outstanding shares from an existing share - holder. 3. Mergers and Acquisitions 3.1 Transaction Structures Transaction Structures Acquisitions of public companies in Taiwan may trigger the mandatory tender offer requirements prescribed under the Securities and Exchange Act (SEA) – ie, any - one who plans to individually or jointly acquire 20% or more of the total issued and outstanding shares of a public company within 50 days must initiate a pub -
lic tender offer and comply with additional disclosure requirements and restrictions. Key Considerations The review of foreign investments by the DIR is one of the crucial considerations for a foreign investor in selecting a transaction structure. Under a share deal, an investor will assume the entire operations, rights and obligations of the invested entity, and a foreign investment approval (FIA) from the DIR will be required. By contrast, if a foreign investor plans to acquire a specific business line or certain assets from a Taiwanese seller, an asset deal may be considered and no FIA will be required – although the foreign investor will need to establish a local presence in Tai - wan (eg, a subsidiary or a branch office) to hold such business line/assets and the set-up of the subsidiary will be subject to the DIR’s FIA as well. A potential tax implication is also one of the key considerations for foreign investors when designing the transaction structure. By way of example, in an asset deal, the profit gained by a Taiwanese company (including a company invested in by foreign investors) from its sales of movable assets will be subject to income tax at 20%. Conversely, capital gains derived by foreign investors from the disposal of shares in Taiwan companies are exempt from income tax and will be subject to a securities transaction tax at 0.3%, provided that such Taiwan companies have issued share certificates. 3.2 Regulation of Domestic M&A Transactions For domestic M&A transactions, the major regula - tory approvals of which an investor should be aware include a potential pre-closing antitrust filing. See 6. Antitrust/Competition for a detailed description. Certain sector-specific approvals and foreign owner - ship restrictions may apply to foreign investors. By way of example, M&A transactions involving financial institutions may be subject to additional scrutiny by the Financial Supervisory Commission (FSC), and M&A transactions involving the energy industry or the transfer of factory ownership may require the rel - evant environmental permits and must comply with the applicable zoning regulations.
597 CHAMBERS.COM
Powered by FlippingBook