TAIWAN Law and Practice Contributed by: Lihuei Mao, Dennis Yu and David Tien, Lee and Li Attorneys-at-Law
5. Capital Markets 5.1 Capital Markets Overview In Taiwan, funds can be accessed via capital markets and bank financing. A company whose shares are publicly offered, regis - tered on the Emerging Stock Market (ESM) or listed on the TWSE or the TPEX may obtain financing from the capital market by issuing shares or bonds. The regulator for the securities market is the FSC. The TWSE was established in 1961 and is the primary equities market in Taiwan, renowned for maintaining an orderly market and a cost-effective trading capabil - ity since its inception. The TPEX was founded in 1994 and has actively assisted companies from emerging and hi-tech industries as well as SMEs in listings and fundraising, greatly expanding the scope of Taiwan’s securities market. The TPEX established the Emerging Stock Board (ESB) in 2002, which has developed into a preliminary market before an IPO. In 2021, the TWSE launched the Taiwan Innovation Board (TIB) and the TPEX launched the Pioneer Stock Board (PSB) under the ESM (a separate new board in addition to the ESB) – aiming to facilitate fundraising by innovative businesses in the capital market – ini - tially restricted to qualified investors. As from 1 Janu - ary 2024, the PSB ceased to exist and the companies registered on the PSB and ESB were integrated into a single market under the ESM. In response to this change, since 1 January 2024, companies applying to register on the ESM have been able to choose to adopt either the general public issuance or simplified public issuance procedure and the ESM has become open to all investors. Starting on 6 January 2025, the TIB also became open to all investors. To apply for a public offering or listing of shares, a company must observe the TWSE/TPEX listing rules, the SEA, and other applicable laws and regulations promulgated by the FSC from time to time. 5.2 Securities Regulation Securities Regulation The SEA is the main legislation governing the offer - ing, issuance and trading of securities, and stipulates civil and criminal liabilities for misconduct in respect
of securities. The FSC has the authority to promulgate the necessary rules and regulations to supplement the SEA. The TWSE/TPEX’s listing and disclosure rules also apply. The Company Act applies to all companies incorporated in Taiwan, regardless of whether they are listed companies or otherwise. However, if there is any discrepancy between the SEA and the Company Act in respect of a public company, the SEA will apply. Foreign Investment in Listed Securities According to the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nation - als, which was most recently amended on 11 Febru - ary 2014, foreign investors wishing to invest in secu - rities registered on the ESM or listed on the TWSE or the TPEX – or in other securities approved by the FSC – must register with the TWSE before making any investment. Such foreign investors are commonly known as foreign institutional investors (FINIs) or for - eign individual investors (FIDIs). Nevertheless, if a foreign investor intends to acquire 10% or more of the shares in a company that is listed on the TWSE or the TPEX or registered with the ESM through a single transaction, it should apply for an FIA from the DIR instead of going through the FINIs or FIDIs route. Certain Restrictions on Purchase and Sale of Public Securities The transfer of shares in a public company by a cor - porate insider is subject to restrictions in terms of to whom the shares may be transferred, the number of shares that may be transferred, and when a trans- action may be made. A corporate insider is defined under the SEA as a director, supervisor, managerial officer or a shareholder holding more than 10% of the total shares of an issuer. Any person planning to acquire 20% or more of the total issued shares of a public company within a period of 50 days must do so through a tender offer, unless any statutory excep - tion applies. 5.3 Investment Funds Foreign investment funds are subject to the same for - eign investment regulatory review process as other foreign investments. However, they are usually more harshly scrutinised by the DIR, which will cautiously
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