TAIWAN Law and Practice Contributed by: Lihuei Mao, Dennis Yu and David Tien, Lee and Li Attorneys-at-Law
• Compared to a subsidiary, a branch does not have its own AOI and there is no decision-making body such as the board of directors. • An FIA is not required for a foreign company to establish a branch, whereas it is required to set up a subsidiary. • Both the subsidiary and the branch are subject to the same corporate income tax. • Dividends declared by the subsidiary to its foreign shareholder will be subject to withholding income tax at a rate of 21% or a lower tax treaty rate if applicable. The profits of a Taiwanese subsidiary for the current year that are not distributed by the end of the following year will be subject to 5% retained earnings tax. • Given that a branch is legally inseparable from its foreign home company, net profits realised locally by the branch are considered profits of the for - eign home company, and thus repatriation of such profits will not be subject to any withholding tax. In addition, the requirements concerning the 5% retained earnings tax do not apply to the branch. 4.2 Relationship Between Companies and Minority Investors In Taiwan, the relationships between companies and minority shareholders are generally governed by the Company Act (and any shareholder agreements among the shareholders). The Company Act offers various statutory protections to minority sharehold - ers, including: • every shareholder (even a minor one) is granted statutory information rights, such as access to the financial statements ten days before the annual general meeting of shareholders; • a dissenting (minor) shareholder in an M&A trans - action has an appraisal right; and • any shareholder who has continuously held 1% or more of the total number of issued shares for a period of six months or longer may ask the super - visor in writing to institute a lawsuit against any director on behalf of the company for such direc - tor’s misbehaviour. In the event of security fraud, insider trading or other misconduct by the directors or supervisors of a public company that causes damage to multiple investors,
the Securities and Futures Investors Protection Center is entitled to (and often will) initiate a class action on behalf of the investors – pursuant to the Securities Investor and Futures Trader Protection Act – to facili - tate the protection of minority shareholders. 4.3 Disclosure and Reporting Obligations A public company in Taiwan is subject to both period - ic and non-periodic disclosure obligations under the SEA and its sublaws. The relevant information must be filed with and disclosed through the Market Obser - vation Post System (MOPS) maintained by the FSC. A public company’s top ten shareholders and any shareholder who holds 5% or more of such com - pany’s outstanding shares will be disclosed in its annual report. In addition, a public company must report to the FSC and disclose the information of any shareholder holding more than 10% of its shares. Such shareholders must notify the public company of changes in their shareholdings before the fifth day of each month; thereafter, the public company must report such change to the FSC before the 15th day of every month. In addition, SEA prescribes the report - ing and disclosure requirement for substantial share acquisition. With effect from 10 May 2024, the thresh - old triggering the reporting and disclosure requirement upon acquiring the issued shares of a public company has been lowered from 10% to 5%. Private companies are not subject to the SEA and the aforementioned disclosure requirements. However, private companies and public companies alike must notify the MOEA within 15 days of any change in their registered company information, as required under the Company Act. In addition, the designated items (including names, nationalities, registration date, ID numbers, number of shareholdings, or amount of cap - ital contribution) of the directors, supervisors, manag - ers and shareholders directly holding more than 10% of the total shares must be reported annually on the website maintained by the MOEA or within 15 days of any change thereto.
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